Roth IRA and Education

[Guest rhess]

I have set up educational IRAs for my children, but they will not accumulate enough to finance the entire cost of their college education.

Can I withdraw a portion of my Roth IRA prior to age 59 1/2 to help pay the costs of their education?

[John G]

Education IRA: You are correct that you will not be able to accumulate much in the current formulation, even if you start at birth. I guess Congress did not have a calculator handy the day they set the groundrules. See other listings on this message board for some alternative ideas.

Using your own Roth IRA for your kids education: my view is this is not a good idea. Once you create a tax shelter (the Roth) you want to keep the most amount of $$ in it as long as possible. If your kids are young, the world (and your personal finances) will change signficantly before they start college. You may ultimately decide to borrow rather than disturb your Roth. One aspect of paying for college that most people overlook is that for 18 years you have been paying for food, clothes, housing, etc for a child out of your normal income. When you kid leaves for the big U, the real significant additional cost is tuition. I would suggest that you invest with the goal of paying tuition from the accumulated assets and plan to pay the room & board out of income. I think that is a more realistic goal for college savings.

[Kathy]

Although many of the others who participate on this message board disagree with the wisdom of doing it this way, you can withdraw your own contributions from your Roth IRA without tax or penalty any time you want. You can also withdraw converted amounts with no penalty if the distribution is used for qualified education expenses. And in fact, this is my strategy for paying for my 2 boys' education as well. I am maxing out my 401(k) so that I can borrow against it, contributing to the Roth IRA so I can withdraw my contributions from it and contributing to their Education IRAs as well. My goal is to have as much of my money growing on a tax deferred basis as possible so that I will have choices when they reach college age and decide where they want to go. And of course we're trying out all of the sports too just in case we hit on one that could lead to scholarships but that isn't looking too promising.