Ask a Fool: What's the Best Way to Invest Money I Might Need to Pay for College?
For most college savings, a 529 savings plan is the way to go -- especially if it gets you a break on your state taxes. The downside is that you'll get hit with a 10% penalty for any withdrawals that aren't used for qualified educational purposes.
One smart alternative is using a Roth IRA, if you qualify for one based on your income. While these accounts are designed for retirement, they have a lot of features that make them good choices for college savings.
For one thing, Roth IRAs have the same general tax structure as 529 savings plans. There's no federal tax break for contributions, but qualifying withdrawals will be 100% tax-free. And while you generally have to wait until 59 1/2 years of age to withdraw from an IRA penalty-free, there's a specific exemption for withdrawals used for college expenses.
Quelle Fool.com
