Today’s question of the day is:
“Justin, I read your blog post about options of where to fund your child’s college education for maximum savings. You mentioned a Roth IRA, so how exactly do I do that?”
Well most of us who have kids are most likely under the age of 50, which means we can put $6000 a year into our Roth IRA currently. So let’s assumed my wife and I just had a baby, and we’ve got 18 years theoretically before they would go to college. That means over that 18 years if I were to max out my ROTH IRA I could put in almost $99,000 in contributions, which would pay most, if not all their college expenses in today’s college environment. If I did this and at age 18, I began utilizing it to pay for college. I’ll start drawing the money out that they need for expenses.
The reason this idea could be a great option is what if your child gets a scholarship? What if they don’t want to go to college at all? Perhaps they’d rather start a business. Or maybe they decide to marry first. You may be thinking, “do I really want to put all that money back in a 529 plan that we’re going to have all these restrictions on it?”
So, by all means, go for it! BUT please don’t use this concept to the detriment of your retirement plan. Your child can borrow money for college—you cannot when it comes to retirement. Your college savings should come only after you are fully funding your retirement plan.
Now, you know that you can do it, but should you do it? It’s not a bad idea. I like the idea. However, ONLY after you have fully funded your retirement! If you have questions about utilizing a ROTH for college contact us! We’ll do our best to help you make it a financially simple choice!