If a family qualifies for a Roth IRA (income phase-outs apply if adjusted gross income is between $110,000-$125,000 for singles and $173,000-$183,000 for joint filers in 2012), it can be a wise investment because it is extremely flexible. The annual contribution limit in 2012 is $5,000. In addition, there is an additional $1,000 catch-up contribution for workers age 50 and older ($6,000 total). You can withdraw your Roth IRA contributions tax-free for any purpose, including a child's college expenses. In addition, if the amount you withdraw from your traditional IRA in a given year doesn't exceed the amount of your qualified higher education expenses for that year, the 10% penalty tax won't apply. However, you'll pay tax (but no penalty) on any earnings you withdraw from a Roth IRA before age 59 1/2 for college expenses.
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