Unexpected ways to use those Roth IRA contributions

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Roth individual retirement accounts, in which after-tax deposits — and subsequent earnings — grow tax free, may be one of the best ways to save up for your golden years. But certified financial planner Sophia Bera, founder of financial advisory firm Gen Y Planning, says Roth IRAs can also come in handy long before account holders settle down into retirement.

Because tax has already been paid on monies deposited in a Roth IRA, contributions — but not the interest earned on them — can always be tapped for other purposes. For example, “if an emergency comes up, you can actually take out the money from your Roth IRA and use it for any purpose,” Bera said. (One caveat: There are income limits on who can contribute to Roth IRAs.)

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Here’s a look at three other unexpected ways to use a Roth IRA.

1. Getting smart. In addition to emergencies, a Roth IRA can be a useful way to save up for non-retirement expenses. One example: As a savings vehicle for a portion of a child’s higher-education costs. Contribute the maximum $5,500 per year for 18 years, and you would be able to withdraw the resulting principal (which would total $99,000 in deposits by the time your kid turns 18) for college tuition costs. “The rest of the money in the account, or hopefully the earnings on the account, would then continue to grow for your future retirement.”

Even better, Roth IRA monies aren’t factored into the estimated family contribution on the Free Application for Federal Student Aid (FAFSA). “So you may qualify for more financial aid if you’re using your Roth IRA to fund college as opposed to something like a 529 plan.”



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