By timestaff
June 27, 2013

I have mutual funds, a Coverdell, a 529, and a Roth. Which do I use first for my son’s college? — P. Hazen, Wilmington, Del.

Take into account taxes and, if you qualify, need-based aid, says Troy Onink, CEO of, a college-planning firm.

Start with the 529 and Coverdell Education Savings Account: Withdrawals for eligible expenses, such as tuition and books, aren’t taxed or counted as income in financial-aid calculations.

You might also tap the mutual funds to get the American Opportunity Tax Credit, worth as much as $2,500 annually. You’ll have to spend up to $4,000 from sources other than the 529 or ESA; the income phaseout is $180,000 for couples and $90,000 for singles.

Save the Roth for last (using it only if you’re already set for retirement). You can withdraw contributions tax-free; earnings used for school are taxed as income.

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