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Using a Roth IRA for college: Weighing the pros & cons

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As you watch your child grow and explore their interests, your thoughts may turn toward what their future career might be—and the potential college expenses necessary to get them there.

There are a lot of ways you can save up to pay for higher education costs, but one you might not have considered is a Roth IRA. If you've only ever thought about these accounts in terms of retirement savings, here's some insight into the pros and cons of using a Roth IRA to finance your child's education.

How can you save for college with a Roth IRA?

A Roth IRA is an individual retirement account that allows you to save for your future in a tax-advantaged way. Contributions to a Roth IRA aren't tax-deductible, but you have the potential to take tax-free withdrawals from the account.1 This money is typically held for you to use in retirement, but it also can be used to cover qualified higher education costs without incurring the 10% early distribution penalty. Plus, if the money isn't used for college, it still can be held for retirement.

  • In 2023, you can contribute up to $6,500 to a Roth IRA if you're under age 50 and up to $7,500 if you're 50 or older.
  • In 2024, you can contribute up to $7,000 to a Roth IRA if you're under age 50 and up to $8,000 if you're 50 or older.

Anyone is eligible to contribute to a Roth IRA as long as they're under the income thresholds.

  • If you make between the maximum MAGI listed, you can contribute but it will be a reduced amount.
  • If you make equal to or more than the maximum limit listed, you can't contribute anything to a Roth IRA.

If you're over the income limit and can't contribute to a Roth IRA in your name, you still may be able to open an account in your child's name as long as they have earned income.

    Filing status

    2023 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA

    2024 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA

    Single or head of household



    Married filing jointly



    Married filing separately



    Roth IRA withdrawal rules & qualified higher education expenses

    Your Roth contributions come out first when you take a distribution. You can use the contributions to cover higher education expenses without tax or penalty. If there are not sufficient funds from contributions you then could access the Roth IRA earnings. Normally, you would incur a 10% early withdrawal penalty and taxes when you take earnings out of a Roth IRA before turning age 59½ and reaching the five-year holding period.

    However, the IRS has several exceptions to the early withdrawal penalty and using a Roth IRA for qualified higher education expenses avoids the penalty. However, the earnings portion of the withdrawal—not the contributions—is still considered taxable income.

    Qualified higher education expenses include:

    • Tuition and fees
    • Books and supplies
    • Equipment required for enrollment or attendance
    • The cost of special needs services in connection with enrollment or attendance
    • Room and board (as long as the student is enrolled at least half time)

    Should you use a Roth IRA for education expenses?

    A Roth IRA can be a useful tool for college savings and helping your child advance toward the career they've envisioned for themselves. However, it's essential to understand the benefits and drawbacks to help you make the right decision for your family and financial circumstances.

    3 pros of using a Roth IRA for college expenses

    1. Any unspent funds still are usable for retirement

    If your child decides not to go to college, gets scholarships or doesn't need all the funds in the Roth IRA for education expenses, the account can be kept as a retirement savings vehicle. This gives families more flexibility with their savings while maximizing tax benefits.

    2. Your Roth IRA balance has no effect on financial aid

    Money in a Roth IRA isn't counted when calculating your student aid index (SAI), which determines how much financial aid your student receives. However, you'll eventually have to report withdrawals from the account as your income on the Free Application for Federal Student Aid (FAFSA), so it can impact your SAI two years after you start withdrawing funds.

    3. You have a wider selection of investments

    Roth IRAs typically offer more investment options than other education savings vehicles.

    2 cons of using a Roth IRA for college expenses

    1. Your annual contributions have a low cap

    With annual contribution limits for Roth IRAs at a maximum of $7,500 (or $6,500 if you're younger than 50), you may not be able to save enough to cover the total cost of your child's education.

    2. The distributions will be partially taxable

    While you can avoid paying an early withdrawal penalty on any distributions used to cover qualified education expenses, you typically have to pay regular income tax on the earnings portion of your withdrawals.

    Graduation cap illustration
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    Explore other college savings options

    There's no such thing as being too early to the table with a college savings plan. Here's an overview of the most popular options.

    Dive deeper

    Should you use a Roth IRA instead of a 529 plan?

    You could, but it's more likely you'd be better off using a Roth IRA to save for education expenses in addition to a 529 plan, which is a special college savings plan sponsored by states, colleges and other institutions. These accounts entice savers with perks that a Roth IRA doesn't provide, such as:

    • 529 plans have higher contribution limits. The annual limits for 529 plans are much higher than the contribution limits for a Roth IRA, ranging from around $235,000 to more than $500,000 per beneficiary.
    • 529 plans have additional tax benefits. Distributions from a 529 that are used for qualified education expenses won't incur income tax. Plus, many states offer state income tax breaks for 529 contributions.
    • 529 plans define "educational use" more broadly. Money in both a Roth IRA and a 529 can be applied toward post-secondary tuition and affiliated costs. However, a 529 also can fund K-12 tuition and be applied to student loans up to certain limits.

    But there's at least one key reason to consider putting at least some money in a Roth IRA over a 529 plan:

    • 529s are considered in financial aid awards. The FAFSA counts 529 plans owned by the parent or student when determining financial aid eligibility. The contents of a Roth IRA are not.

    Help with understanding all your college savings options

    Education costs have been on many parents' minds as they've been rising significantly lately. Many savings options exist, and Roth IRAs are just one that may fit into your financial strategy. If you're unsure which route is best for you, connect with a Thrivent financial advisor. They can help you choose the right mix of accounts and investments to support your goals and family.

    Distributions of earnings are tax-free as long as your Roth IRA is at least five years old and one of the following requirements is met: (1) you are at least age 59½; (2) you are disabled; (3) you are purchasing your first home ($10,000 lifetime maximum); or (4) the money is being paid to a beneficiary.

    Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

    529 college savings plans are offered through a brokerage arrangement with Thrivent Investment Management Inc. They are not guaranteed or insured by the FDIC and may lose value. Consider the investment objectives, risks, charges, and expenses associated before investing. Read the issuers official statement carefully for additional information before investing. Investigate possible state tax benefits that may be available based on the state sponsor of the plan, the residency of the account owner, and the account beneficiary. Consult with a tax professional to analyze all tax implications prior to investing.