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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75390  
Subject: Re: Is a Roth for me?? Date: 3/4/1999 8:34 AM
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Greetings, DJFoolish, and welcome. You asked:

<<I just stumbled upon this site and I think it is great. I've been putting off opening a Roth IRA since I first heard of it, last year. It almost sounds too good to be true. I have a 401K, and an IRA (rolled from a previous 401K). Several questions I have are as follows, can I use Roth IRA contributions and earnings to finance child's college education, if need be, without penalties, tax free, when I'm 56 years of age?>>

You may use the IRA the annual contributions at any time for any purpose tax and penalty-free. The same goes for contributions from conversions of traditional IRA after the conversion money has been in the Roth for five tax-years. You must be age 59 1/2 and the account must be open for five tax-years to touch earnings penalty and tax-free unless you meet one of the criteria for a qualified distribution from a Roth. (Note: See my IRA discussion in the Foolish Retirement Plan Primer at http://www.fool.com/Retirement for a description of qualified distributions.) You may take earnings free of penalty at age 56, but not taxes, when you meet one of the criteria for an exception to the early withdrawal penalty on an IRA distribution. Distributions to pay for the costs of a higher education is one of those exceptions. Thus, when you take Roth earnings to pay those costs at an age younger than 59 1/2, you will escape the 10% penalty. Just as in a traditional IRA, though, you will pay income tax on the earnings you have withdrawn.

<< If I open a Roth IRA today (for 1998) does the five year "clock" start today, 1/1/98, or the day I make the last contribution?>>

The five tax-year clock starts as of 1/1/98 for a 1998 Roth IRA contribution regardless of the day that contribution is made. You have until 4/15/99 to make that deposit for tax-year 1998.

Regards….Pixy
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