Can money for college be withdrawn from a ROTH IRA penalty free?? if so where can i find more info??

Question

A finance guy was telling me that you could invest money into a ROTH IRA for your kids that could later be withdrawn for college penalty free. I want to know if this is true and a resource that I can educate myself on it. thanks

Answer 1

I think he is mistaken on that. According to the IRS 590 publication that is not one of the items for which one can withdraw funds from a Roth IRA penalty free. The only item mentioned is for your your qualified higher education expenses, not your childrens. Here is the link.

http://www.irs.gov/publications/p590/ch02.html#d0e10021

The government does offer a saving plan for children, called 529 College plan.

http://www.savingforcollege.com/intro_to_529s/index.php?general_faq_id=3

Answer 2

You can always take YOUR money out of ROTH penalty free - that is the money you have contributed. You already paid taxes on this. It's the money generated from your money that you may face penalties on unless you are at least 59 1/2. So the guy may be partially right - you can put money in and take that money out without penalty - you can keep the gains in the ROTH until you retire. Check out the Motely Fool for easy to understand Investment issues.

http://www.fool.com/index.htm

Answer 3

You can take the principal out penalty free if it's been in there for 5 years. Unfortunately the interest has to stay in....And you can do that from an IRA or a 401k too. Don't recommend taking it from any retirement source unless that source has already been designated as college fund and other sources are being invested in heavily.