Roth IRA for college student - some questions

Parent Cafe
1

<p>So, a year ago son chose the merit-money LAC over the pricey full-pay LAC. We told him during the decision-making process how much money we had for his higher education, and he could chose to spend all of that on undergrad or save some of it for grad school (he is thinking MD). Depending upon how much college costs increase over the next four years, there will be somewhere in the neighborhood of $7000 a year that he could have spend on undergrad that he is not.</p>

<p>If you are with me so far, my question is, would there be a down-side to putting that money in a Roth IRA in his name? I realize that there are annual limits to how much can be contributed to a Roth, but otherwise would it make sense?</p>

<p>Since the contributions are taxed, I am guessing that it does not matter whether he has an income that is at least the amount of the contribution? And if I am reading the rules correctly, he could withdraw the contributions at any time without any penalty? I realize (I think - but someone correct me if am wrong) that there are more restrictive rules about withdrawing any gains, but I am not especially concerned about that. </p>

<p>Any thoughts?</p>

2

<p>I believe that it does matter if he has income. You cannot make IRA (Roth or traditional) contributions without having “earned income” that is (usually) reported on a w-2</p>

<p><a href=“http://perspective.schwab.com/mobile/article/6847/can_you_contribute_to_an_ira_if_you_dont_have_a_job.html”>http://perspective.schwab.com/mobile/article/6847/can_you_contribute_to_an_ira_if_you_dont_have_a_job.html&lt;/a&gt;&lt;/p&gt;