✅ Perks of using a Roth IRA to save for kids college? | FinTips 🤑
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- Опубликовано: 10 сен 2019
- Today we're looking at all your investment options for college savings. We'll cover the various options and even include the Roth IRA which is often overlooked as a great vehicle for your child's college savings.
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If only all financial advisors spoke plain English like you do! Thank you!!
This is by far the most succinct video I've seen on the topic!!!! Thank you!!!
Glad I stumbled upon this video. Did a lot of my Hw for me!!
I was just today talking to a friend about Roths and 529s, this is a great idea. I'll share this video with him.
Now I know what todo with my emergency fund.
Thanks man!
Thank you so much for the info! My wife and I are searching wide and far for the best moves and... this info helps!!!
Great video Dustin. We have a roth for our sons college. Shhhhh!
I was having discussion yesterday about whether a Roth, custodial, or 529 is considered an asset for FAFSA.
Haha, love the Roth, it's such a hack.
That's a trick I didnt know. That's why I watch you!
Love this channel. Always so informative
In 529 you can withdraw all your contributions no taxes on penalties. Only on earnings you’ll pay the penalty and taxes.
I matched and rolled several EE savings bonds from my kids into a brokerage Roth IRA in DIA when the DJIA was 8000. Cashed it out when DJIA was 24000. I made more than if I kept the bonds. Would use Jazz Roth IRA with his aggressive fund if I had to do it again.
wow this is great little loop hole. Thank you
Great Information Justin, dude you are the ROTH Guru
What an awesome video! You really broke it down. Thanks for this information! New subscriber now!
Dustin, there's one aspect of a 529 that you missed. It can be rolled over into an ABLE account. So if you have a child with special needs (or if, G-dforbid, your child is in an accident or something and becomes disabled before 26), you can use the 529 directly to pay for qualified special needs education, or you can roll it into an ABLE account down the line to pay for living expenses.
So that is a what if plan?
Awesome post Dustin. Thank you.
wow what a good timing, i was debating this exact problem between open my wife ROTH IRA or open 529 acct for my kids, sound like spouse ROTH IRA is a good choice, thank you so much!
Another key note is although money from ROTH IRA does not count as asset when apply for FAFSA, it counts as income and this may reduce the amount of money recieve from FAFSA, but i am not sure whether the reduced amount is more less than the 5.64% from 529 plan
Another excellent video - thanks!
Great video! Thank you for the advice 😀
Thanks Dustin great info 👍.
Ugma utma, quick rundown of the difference? I hear them used interchangeably.
we have a custodial account here. My dad has one for her i also but the account is still on my dads name. But we have one for her. We put every month 15 bucks on it. So she gets from me. But also from us in her picky bank. My old aunt also put money in her picky bank cashback goes in there and my dad puts money in there.
If you don’t have a spouse how would you account for that “other” Roth to avoid FASFA disqualification?
Good information, thank you.
Brother man excellent explanation. I have a question I could only use my wife Roth why not mine ? Thanks
For a couple that makes more than the allowable amount to utilize the deductions of a Roth IRA - does it still make sense to start one? We have an active 529 & considering a custodial account. Any financial advice would be appreciated!
What is the growth difference on a 529 vs a Roth IRA?
Good stuff. Thanks
You made feel pretty good about the decision we both made starting a Roth IRA for our twins when they were born.
Fot what job you pay your new twins for? Im completely new to this and looking for ideas for my baby as well.
@Dale Steadman How are your children earning income so they're eligible for an IRA?
Is there not a limit on the Roth IRA for qualified exceptions withdrawals, such as for college?
I think the distribution will be counted as income, even though not taxable--like the grandparents 529--I read somewhere that it is good to use the second semester of junior year so it does not impact financial aid.
It's not counted as income because you already paid the taxes on the contributions to a Roth. It could be counted as an asset if you withdrawal before filling out the fafsa. Spend what you withdrawal each year, and you shouldn't hit any issues.
@@unemployable1747 any Roth contributions taken out are not put on your tax return. The Roth firm reports it, but the info really goes no where. If the grandparents are 59.5+ y/o, their Roth account can be used at anytime for any reason. The gift tax limit is $17k before taxes come into play and $34k for 2 grandparents annually.
My grandson had his first summer job at a car dealership and may have additional availability to work during vacation/holiday weeks. If he opens a Roth IRA at 15, can if have an effect on his college financial aid application?
When building generational wealth or living off dividends is it better with a ROTHIRA or a taxable account?
What is that board you are writing on?
Great video! I currently max out my 401k and have some cash in a Roth IRA. I’ll start contributing more into now that I can use it for their college and I still keep control of it. Win win! Subscribed.
Dustin what if you have a Roth IRA in which you accumulate dividend paying stocks? Can you take out the monthly dividend checks to use for qualified education expenses without taking a tax hit for early withdrawals. Thanks. Keep up the great videos
IRS assumes withdrawals from a Roth IRA first come from your contributions.
What about Coverdell ESA?
If my wife and I each have a Roth IRA can we pull money out of both accounts for college ? In other words if we are not relying on a Roth IRA for retirement can we pull out of both for kids college ?
Can a UGMA/UTMA account be rolled into a 529? Making it no longer an asset and not considered income by FASFA?
Very helpful
i have a minor child that i started giving house chores like folding his own launry, pickup leaves in fall season, water plants in spring, does lemonade stand, empty garbage can in his room etc... So far he has save total of about little over $5k. I didn't know anything for having Roth account for a minor until this wk.
My question is what do I need to proof the IRS how he earned the money ? Thank you!
doing chores is not considered earned income, but I see a local furniture business that has their children do regular tv commercials. My grandson began working with his dad at a body shop at 15 with regular checks. I opened a Roth for him and put an amount up to the earned income amount each year. If your minor child had a lawn mowing business for neighbors and friends, that would work. Some people say that the child would need to do a tax return, but that might just be an opinion without facts backing it. Just would require some record keeping and I wasn't that willing to do that. 17 y/o grandson now has about $10k in his Roth. He may qualify for a sports scholarship and he is looking at his college options.
Never a big fan of 529s, this is a much more flexible way to go. Not all kids benefit from college. When I was there years ago, I saw a lot of them actually ruin their lives. They might as well had a bonfire made of dollar bills.
Cool idea
I am against the 529 simply because we don't know if my kid is gonna go to college or not. What if he decides to join the military and his school is paid for with the GI bill? What if he ends up being a little turd (I hope not) and just doesn't wanna go to college or goes but isn't focused and wastes all of that money thats been saved? Just not the best option for my family.
Just when I think I have the right answer for the kids college you teach me something new…. 🤔
I thought you didn't have to pay any taxes on the gains in a Roth IRA. I thought you only paid a 10% penalty on any gains. This is just in general. I thought it was the 401k that you pay taxes and the penalty on.
Why would withdrawing from the Roth for collect waive the 10% penalty but you'll be taxed? I thought Roth was no tax?
Taxed only on the gains beyond your contributions I believe.
Any broker names, anyone?
If you withdrawal all your principal and some of your gains out of your Roth for your kids college, what is left for your retirement? I think there are lots of case studies out there, but doesn't it just make you cringe a little bit to see people withdrawing funds from their Roth? This strategy could easily wipe out a decade of contrabutions.
The point of this "trick" is not to turn your Roth IRA into a college fund, but rather use a spouse's Roth IRA (if you don't already have one for both) and use that as a college fund. Obviously this wouldn't work for everyone, but for families like us where only I have a Roth IRA, we're definitely going to open one for my wife and use that as a college fund to supplement the 529 accounts I already have.
With a fiduciary model you set up, how do you get paid?
People pay them to be their wealth manger i.e do what he shows in this video for them
It's FAFSA :)
If we open two ROTH IRA ( one for me + one for spouse) account, then what will be the maximum contribution amount per account?
You may contribute $6,000 toward your Roth IRA account and spouse may contribute $6,000 toward their Roth IRA account. This assumes that your combined income is at least $12,000 for the year.
Work, work, work with me, do it right! What’s the lyrics? Ahhhhh!
What if you don’t have a spouse and want you invest in a Roth IRA to pay for child’s college? Will you still be penalized on your contributions?
No
I am going to college soon and I am planning on opening a Roth IRA for myself. Do I need to wait 5 years after the account was made to take out the money to pay off college loans without the 10% penalty? Will it count as an asset in the fafsa if its under my name?
You can always take out your contribution amount without penalty, so technically you put $6,000 and a month later you need the $6k. It's ok to take the $6000 out anytime. It's the earnings on the $6k that cannot be taken out penalty free until the account is "qualified", meaning the account has been around for 5+ years AND you are 59.5+ y/o.
But Dustin, you forgot Whole Life Insurance! 😬
He doesn't talk about things concerning scams
The last option only works if you have a spouse? 😔
I would like to know that as well... wonder can you get a separate Roth on yourself without being married and this still work...
I would rather take my chances on 529 and avoid ordinary income tax on earnings if they do go to college- I thought you could roll the 529 to you grand kids as well
What if you split your college savings into a Roth IRA and 529 accounts? I already have 529 accounts and now I plan to open a Roth IRA for my wife and use that as a supplement to the 529 accounts.
I just noticed this guy only has four fingers on his right hand.
Holy sh*t you're right
Now I can’t un-see it... never noticed till now
So can I open multiple Roth IRA accounts in for my spouse fir each child?
You and spouse may have as many Roth IRA accounts as you want however $6,000 maximum _annual_ contribution per person not per account.
I watched an earlier video from this guy telling you to NEVER use an IRA to fund you kids college.
Generally not ideal to fund kid's college with your retirement money. Priority is to fund own retirement before funding college expenses.
Never is such a strong word. I am a grandfather with a Roth that I may not need in retirement and I am planning on funding my grandchild's college. I have complete control versus a 529 transferring to the child at 18 years old. I also opened and fund my daughter's Roth, but I am in a much better position to fund from my Roth.
Yeahh I'll stay away from the custodial account
We were required to report 529s for all kids on FAFSA.
529 counts against FASFA as well, correct?
Yes, but only considered 5-6% weighted against, so quite minimal.
why cant it be under my name instead of my wife's? Can't it be like my supplemental retirement fund?
529 is better than Roth IRA, if the money is intended for education.
Every dollar you put into your kid's roth IRA, you have to pay income tax on behalf of your kid (Unless your kid is able to bring home W2 or 1099's under their name). I.E., You end up losing 10~12% of the money going into your kid's Roth IRA right off the bat.
Just stick to 529.
My 2 daughters decided for themselves that college was not for them. I had money saved, but not in a 529 plan. One eventually needed a car and applied here savings towards her car. The other used it for her wedding expenses. I would have much more preferred that the money saved was used for college, but I think for them it would've been a waste of money. 20 years later, they both have very good careers that did not require a degree. I guess one of their son's is a year away from college and if the 529 was still around, he could be using it for himself. I just dislike restrictions, penalties, etc that come with 529. Maybe if there were more children and grandchildren it would be a wiser course of action.
FAFSA*
You're right. Always say that wrong. Also, hang in there buddy. Your music will be legendary 😂
Take the missus out? WTF
You don’t pay taxes on earnings for Roth, so he’s giving wrong info
You are correct that a qualified retirement distribution from a Roth IRA does not have tax on earnings. The key words being the qualified retirement distribution.
Every parent is all for college until they have to save money for it. All of a sudden they consider their kid not going to college... lol money does wierd things to poeple.
IUL is also a great option. Take money out anytime, tax free!