Using Roth for college expense planning

[Guest tplovelock]

I am doing some planning for my daughter's college expenses and have done some research on using Roth's after we deplete the Education IRA. According to the IRS, this is permissible for qualified expenses, but Publication 590 does not seem to distinguish between which "buckets" of money can be used tax-free.

I read an article in Kiplinger's, however, that says that only the amount contributed to the Roth can be withdrawn tax-free for qualified education expenses; any earnings withdrawn, while not penalized, are subject to taxes.

Is this correct? I have not been able to find this distinction at the IRS website.

Thank you in advance for any answers.

Tim Lovelock

PS: I am confortable with my existing retirement planning and I'm planning to use the Roth as a combination "college fund/addt'l retirement" account.

[BPickerCPA]

Contributions to a Roth can always be withdrawn tax and penalty free at any time. Earnings that are withdrawn for qualified higher education expenses do not constitute qualified Roth IRA distributions. Therefore the earnings WILL be subject to income tax, but will be exempt from the 10% penalty.

[John G]

As I have noted previously in this forum, taking money out of a Roth early for education, buying a home, etc is unlikely to be a good idea. A Roth is a amazing tax shelter that you want to keep sheltered as long as possible. The average family just doesn't have many options to shelter income, and either because of income changes or legislative changes you may not always have the Roth option. Think twice before pulling $$ out from a Roth. In my experience there are ussually other alternatives that may make more sense in the long haul.