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Ask Dave

Saving The Wrong Way

Read when a Roth IRA is not the best way to save, and when a 529 plan is.

QUESTION: Michael has $10,000 to invest for his daughter’s college fund. He was told to invest in a Roth IRA for her college, and that didn’t sound right to him.

ANSWER: The Roth IRA is for retirement, and when you use it for college, you neuter its ability to grow huge and do so tax-free. Your child can’t do a Roth IRA unless they have an earned income. Use a 529 plan in this case; look for one where you control the mutual fund that the money goes into. You choose the mutual fund and you have the ability to move the money around.