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Financial Planning / Tax Strategies


Subject:  Roth IRA or Edu IRA? Date:  1/19/2000  5:58 PM
Author:  Tag72 Number:  25516 of 133503

Hi Fools,

Any advice is greatly appreciated. I know, Roy, you are the expert and you are very knowledgable on this, I would appreciate your input. Please bear with me and the length of the message. I checked the Tax FAQ and I tried to look up and understand the information given as best as possible. My brother has 2 kids and he is saving for their college education. He is wondering if it is better to just put money in a Roth IRA, in his and his wife's name, to save for his children's EDU instead of a separate EDU IRA for each of his kids. I know in a EDU IRA there is no penalty or income tax as long as the amount withdrawn is not more than the higher education expense. But, college financial aid's will give less money because they will count this as money towards their income or assets. Also, the kids are not eligible for the Hope or Lifetime Learning Scholarships. To my understanding, in a Roth, they can withdraw the money for higher education purposes with no penalty, but I do believe they are taxed on any gains. However, I think that college financial aid's will not count the Roth against my brother regarding financial aid. Am I correct on these analyses? Saying all of that which would be better to save for my brother's kids' education? I know because he can put more principal $2,000(Roth) vs. $500(EDU) in the account, he can accumulate mote gains. Correct? I know the ultimate decision is my brother's. However, any thoughts are helpful to show any options he has not considered. Thanks for the time and help.

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