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Greetings, BillW321, and welcome.

<<My son is 15 years old and has $1500 earned income to invest. To start a self-directed Roth IRA for himself I have three concerns. Will the monies invested count against him for any financial aide at college time? After 5 years I understand that the money can be used for the purchase of a new home penalty free. Are there any tax ramifications? Can monies from a Roth be used for education after 5 years without penalties?>>

The jury's still out on how the Roth IRA will count against the student's college financial aid when that IRA is owned by the child. Typically, retirement assets are excluded in determining eligibility, but the Roth is a new ball game and financial aid offices have a wide latitude. You'll have to wait longer on this one to see which way the ball will bounce.

As to using the money for education or a new home purchase, keep in mind that all that's avoided when the withdrawal is for those purposes is the 10% penalty for early withdrawal. Ordinary income taxes must still be paid. Also, remember the home purchase withdrawal has a lifetime limit of $10K.


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