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>> I have openned a Roth IRA. If I never use it for education, its mine for retirement. IF I use it for education, as I understand it, it gets spent as if it wasn't an IRA; that is to say I can take money out without the addtional 10% penalty. I just have to pay
tax on the money.

I figure I can't lose too badly with this approach. Does this have anyu merit, or have I screwed up my logic somewhere?
It's potentially a bit better than that. Not only are withdrawals for qualified educational expenses not subject to the penalty, but there is also no ordinary tax liability on the original *contributions*.

So, for example, if you contribute $2,000 to a Roth IRA, you can later withdraw $2,000 for qualifying expenses with no tax consequences whatsoever. Withdrawals that exceed your original contributions are, however, subject to tax as ordinary income unless you meet all the other Roth distribution requirements.

There are two genuine advantages to using a Roth for education savings. One is that you can contribute more per year to it, since the limit on an Education IRA is $500 per beneficiary. The other is that since it remains your money, not your child's, college financial-aid officials will have to view it differently. (And to my mind they shouldn't look at retirement investments at all, although if this strategy catches on, they probably will.)

A disadvantage is that the earnings will be taxed if they're withdrawn for educational expenses, while the proceeds of an Education IRA are completely tax-free. I would say that it makes some sense to use both, if you can. The same income limits apply for contributing to both.

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