Other Education Funding Options
In addition to 529 plans and Coverdell Education Savings accounts, mutual funds and other investment strategies may help fund a future education.
Roth IRA ― The tax-deferred earnings in a Roth IRA are not subject to a 10 percent IRS penalty for withdrawals prior to age 59½ if used for education, and qualified distributions are tax-free.1 Contributions to a Roth IRA are not tax-deductible, so they can be withdrawn at any time without penalty.
Permanent Life Insurance2 ― Money can be withdrawn from your life insurance policy’s cash value accumulation, which will not impact the student’s eligibility for financial aid.
Scholarships, grants and other forms of financial aid are often available for college; contact the school’s financial counselors for more information.
Because these options may have other financial impacts, talk to your agent before tapping them to pay education expenses. Find an agent now.
1Income-tax treatment of Roth IRAs at the state level may differ.
2If you do not need all of the life insurance protection, you can withdraw and/or borrow money from your cash value accumulation tax-free up to a certain amount to help pay education expenses, depending on the type of policy. Any withdrawals or policy loans will reduce the death benefit if the amount is not repaid by the time of death.
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