CNN Money – Katie Lobosco
“Most states offer a 529 plan to help people save for college. You contribute after-tax dollars to the account, which are invested and allowed to grow tax-free. Sometimes your contributions are tax deductible, too, depending on the state. Though they were created to help people save for retirement, Roth IRAs work in a similar way. But you don’t get a tax deduction for your contributions. The big difference between the two accounts is that the money in a 529 must be used for qualified higher education expenses, or else be slapped with a 10% penalty. The contributions you make to a Roth IRA can be withdrawn at any time for any reason. And you can take out the earnings on your investments in a Roth for more of your needs, including education expenses, buying your first home, and eventually retirement.”(more)