Question:   

My wife and I have a newborn daughter.  We intend to save for her college education in a Section 529 plan because of its incredible benefits.  But, we do not wish to invest all her college savings in a Section 529 Plan because of its restrictions on the use of withdrawals.  Our family income is $140,000 and we can save about $10,000 more per year.  Is there some other place to invest college money in addition to 529 plans?

Answer: 

Sure, a Roth IRA.  The “R” in IRA stands for retirement, but because you can withdraw contributions at any time tax- and penalty-free from a Roth IRA, the account can serve as a terrific tax-deferred college-savings plan. Say you and your spouse each stash $5,000 in a Roth starting the year a child is born. After 18 years, the dual Roth IRA’s would hold about $375,000, assuming 8% annual growth. Up to $180,000 — the total of the contributions — can be withdrawn tax- and penalty-free and any part of the interest can be withdrawn penalty-free, too, to pay college bills.

Feel free to contact me if you or someone you know has this type of situation.  Financial Planning advice presented here is general in nature, and individual circumstances make applying these general rules tricky; thus, the above answer cannot be applied to all circumstances because the slightest variation could cause a different outcome.