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LovesMike
LIF Adult
Member since 8/10 978 total posts
Name:
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Saving for college - Roth IRA
Anyone here not using the 529 plan to save for college, but using a Roth IRA instead? I'm interested to hear how you did it and if there are any drawbacks that would make the 529 more worthwhile instead. TIA!
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Posted 2/1/16 12:28 PM  |
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NervousNell
Just another chapter in life..
Member since 11/09 54921 total posts
Name:
..being a mommy and being a wife!
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Re: Saving for college - Roth IRA
I thought you couldn't touch a Roth IRA until you were 62 or something like that.
I don't think it's meant for college savings.
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| Posted 2/1/16 12:32 PM |
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LovesMike
LIF Adult
Member since 8/10 978 total posts
Name:
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Re: Saving for college - Roth IRA
Posted by NervousNell
I thought you couldn't touch a Roth IRA until you were 62 or something like that.
I don't think it's meant for college savings.
You can always (after the account has been established for 5 years, I think) deduct your contribution at no penalty and you can use the contributions and the gains toward education expenses, hence the reason people use these for college over a 529. And since they don't have the same negative implication on your child's FAFSA application. That is what I read at least . . . looking for some confirmation and ideas here! I want to start saving for DDs college, but don't have a great feeling abut 529s, but everyone seems to do them!
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| Posted 2/1/16 12:37 PM |
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MaZz
* Lovin my baby girl!!! *
Member since 2/09 6243 total posts
Name:
Gina
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Saving for college - Roth IRA
We have some Roth IRAs as college savings. You can withdraw your contributions at any time... It's the dividends that you cant touch for a while ...
"Direct contributions to a Roth IRA (principal) may be withdrawn tax and penalty-free at any time.[3] Earnings may be withdrawn tax and penalty-free after 5 years if the condition of age 59½ (or other qualifying condition) is also met. "
Message edited 2/1/2016 3:53:30 PM.
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| Posted 2/1/16 3:53 PM |
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Salason
♥
Member since 6/05 9878 total posts
Name:
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Re: Saving for college - Roth IRA
I do the NYS 529 primarily because you can deduct up to $10k of your contributions on your taxes per year.
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| Posted 2/1/16 4:16 PM |
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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Saving for college - Roth IRA
This is probably a good idea because in 16/17 years if you find out you're struggling to save as much as you need for retirement, you can always just save your Roth IRA for that.
Your kids can take out loans for college but you can't take out loans for retirement!!
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| Posted 2/1/16 5:56 PM |
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Millie3
LIF Adult
Member since 7/13 1280 total posts
Name:
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Re: Saving for college - Roth IRA
We have a mix of IRA's and brokerage accounts for college savings. Anything can happen in 18 years. I could never tie up funds in an account specifically for College. What if the kids get a scholarship, spouse loses a job, divorce, housing crash/ loss of equity, etc. I've always had a bad feeling about 529's and I worked in the financial industry.
ETA: None of these accounts are in the children's names. Everything is in my name. They won't have anything in their names until we hand it over.
Message edited 2/3/2016 7:57:03 AM.
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| Posted 2/2/16 10:37 AM |
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MrsB612
LIF Adolescent
Member since 12/12 784 total posts
Name:
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Saving for college - Roth IRA
We chose the Roth IRA over the 529 plan for a few reasons. It doesn't limit him to using the funds only for college. As PP mentioned, what if he got a scholarship, or what if he decided to go to a CUNY school which isn't expensive - the 529 can only be used for education. The Roth IRA he can tap into for anything. Education, downpayment on a house, etc etc.
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| Posted 2/2/16 11:42 AM |
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TheDivineMrsM
2 girls 4 me!
Member since 8/08 7878 total posts
Name:
Mama mama mama....
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Re: Saving for college - Roth IRA
Posted by LovesMike
Posted by NervousNell
I thought you couldn't touch a Roth IRA until you were 62 or something like that.
I don't think it's meant for college savings.
You can always (after the account has been established for 5 years, I think) deduct your contribution at no penalty and you can use the contributions and the gains toward education expenses, hence the reason people use these for college over a 529. And since they don't have the same negative implication on your child's FAFSA application. That is what I read at least . . . looking for some confirmation and ideas here! I want to start saving for DDs college, but don't have a great feeling abut 529s, but everyone seems to do them!
529s are looked at as parent assets. It's not calculated the same ways as a child's savings account (which is a child asset). Parent assets have a less impact than a child's assets on FAFSA.
I like a lot of things about the 529, but especially love that money can be moved from one child to another. So if DD1 goes to SUNY Binghamton and DD2 goes to Cornell, I can put the money where it's going to be needed most.
A 529 can be used for any form of post-secondary education - so if one of my daughters goes to a trade school, she can still use it.
BTW... I'm a guidance / college counselor in a top high school and get sent to Fin. Aid workshops every year. All my info comes from HESC 
Message edited 2/2/2016 12:31:21 PM.
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| Posted 2/2/16 12:28 PM |
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LotsaLuv
Us
Member since 6/10 4094 total posts
Name:
F
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Saving for college - Roth IRA
We have a Roth IRA for DD for the same reasons PP's mentioned above. I just wasn't comfortable with the 529 because the money I am saving for her is for her and not specifically for college, or if she doesn't need all of it for college not for another child (my son will have his own savings). I also have a high interest savings account for her. Even though interest rates are garbage right now, eventually that will turn around and I can lock some money into 5 or 10 year CD's.
Message edited 2/2/2016 1:39:22 PM.
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| Posted 2/2/16 1:37 PM |
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LovesMike
LIF Adult
Member since 8/10 978 total posts
Name:
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Re: Saving for college - Roth IRA
Thanks for all the replies! Questions for those of you that use the Roth IRA for college savings -
1) what money do you use? Do you use your DCs money (that they might get as gifts) or do you fund it yourself with your money? Both?
2) what do you do with your DCs money? Right now DD has a "high yield" savings account which is getting a whopping 1.09% interest rate for the first year. I didn't see any good CDs to tie it up so I figured keep it fluid until something better comes along. Open to suggestions!!
I like the idea of using the Roth IRA for all the reasons stated - most of all that life is unpredictable and if she were to get a scholarship or decide not to go to college, then the money can be used for retirement and isn't tied up for college only - as a PP said she could also get a loan for college but no one is lending for retirement! But, if I use her money to fund it, how would I use it then? I can't seem to wrap my head around the best way to do this! If you wouldn't mind sharing the particulars of your situation with me, I'd be grateful! TIA!! 
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| Posted 2/2/16 3:59 PM |
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MaZz
* Lovin my baby girl!!! *
Member since 2/09 6243 total posts
Name:
Gina
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Saving for college - Roth IRA
You are allowed to max out the Roth each year at $5500. Any money she gets is thrown into there plus I contribute to it each paycheck... I like that I can use it for anything should a need arise but it's pretty much out of sight out of mind. My accountant (very good friend of ours) suggested dh and I each open one over a 529... He has done the same himself and I trust his opinion.
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| Posted 2/2/16 5:36 PM |
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jessnbrian
Only God knows His plan for us
Member since 4/13 7238 total posts
Name:
Jessica
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Re: Saving for college - Roth IRA
Posted by MrsB612
We chose the Roth IRA over the 529 plan for a few reasons. It doesn't limit him to using the funds only for college. As PP mentioned, what if he got a scholarship, or what if he decided to go to a CUNY school which isn't expensive - the 529 can only be used for education. The Roth IRA he can tap into for anything. Education, downpayment on a house, etc etc.
The 529 is for education - but can be used towards anything. Scholarships don't pay for room and board usually. But the 529 can literally be used for anything - food, clothes, books, not just tuition expenses. Just wanted to throw it out there. We did the 529, just our personal preference.
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| Posted 2/3/16 6:47 AM |
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Millie3
LIF Adult
Member since 7/13 1280 total posts
Name:
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Re: Saving for college - Roth IRA
Posted by LovesMike
Thanks for all the replies! Questions for those of you that use the Roth IRA for college savings -
1) what money do you use? Do you use your DCs money (that they might get as gifts) or do you fund it yourself with your money? Both?
2) what do you do with your DCs money? Right now DD has a "high yield" savings account which is getting a whopping 1.09% interest rate for the first year. I didn't see any good CDs to tie it up so I figured keep it fluid until something better comes along. Open to suggestions!!
I like the idea of using the Roth IRA for all the reasons stated - most of all that life is unpredictable and if she were to get a scholarship or decide not to go to college, then the money can be used for retirement and isn't tied up for college only - as a PP said she could also get a loan for college but no one is lending for retirement! But, if I use her money to fund it, how would I use it then? I can't seem to wrap my head around the best way to do this! If you wouldn't mind sharing the particulars of your situation with me, I'd be grateful! TIA!!
One brokerage account (My name only), holds all of their gift money and money we give them. I choose individual stocks for this account and it's doing very well. This account will be split between both kids when the time comes.
A second IRA account (again my name only) is funded by us and a set amount goes in every month automatically. This one is a target date retirement type fund and not doing quite as well as the first account.
The third brokerage account (DH name only) is funded again by us (every few months funds are moved in) and individual stocks are purchased.
I like relying on all three in case one is not doing well. Plus if the kids don't need it for college, we will hand it over for what ever else they need. The first account will always be theirs. If we have an emergency, the 2nd and 3rd accounts will not be touched.
Basically we are Just hedging our bets 
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| Posted 2/3/16 8:23 AM |
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