From Scott Hanson
If you have children or grandchildren whom you hope will go beyond high school and receive a college education, there’s a good chance you’ve thought about setting some money aside to help pay their expenses. There are some terrific ways to do this, including utilizing 529 plans, but one savings vehicle that is often overlooked as a way to fund a child’s college education is a Roth individual retirement account.
Most people think of the Roth IRA as a terrific method to save for retirement—which it is—but it can also be a great tool to help you cover Junior’s university tab. Unlike 529 plans, which can be used only to cover the costs associated with college, Roth IRAs can be used for both college expenses and retirement income.
Flexibility is very important in managing your money. While 529 plans are a great savings vehicle for college, the funds can only be used for qualified education expenses. The Roth IRA allows you to contribute to both college and retirement savings goals simultaneously. You can always withdraw the principal you contributed to pay for college and allow the interest you earned to grow for your retirement which is pretty sweet. The cons of this strategy are there is an income limit for contributions and an individual can only contribute $5,500 a year ($6,500 if over 50) to a plan. Check with your accountant to see if you qualify.