Thanks again to the Taxpayer Relief Act, you can also draw on Roth IRAs for education expenses.
- You can contribute as much as $5,000 in 2012 ($5,500 starting in 2013) to a Roth IRA, depending on your income.
- You can invest a Roth IRA in just about anything.
- Withdrawals of contribution (not earnings, though) are tax-free. Contributions are subject to taxes.
- The account is under your control. You decide how the money is spent, if at all. If your child doesn't attend college, you can use the Roth IRA to fund other goals
Using the Roth IRA as a college-savings tool suffers from the same drawbacks as using a traditional IRA for college funding. And with a Roth IRA, you can only withdraw your contributions to the account without penalty, not the gains your investments have made.
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Uniform Gifts to Minors Act >>
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