ROTH IRA OFFERS SAVINGS, MORE (FINANCIAL FOCUS)

Since its introduction a few years ago, the Roth IRA has attracted a lot of attention among people interested in saving for retirement, but the Roth has other uses, as well, and you may be interested in them -- particularly if you have college-bound children.

You might already be aware of the key advantage of a Roth IRA as a retirement-savings vehicle. Specifically, your earnings grow completely tax-free, provided you are 59-1/2 and you've had your account for at least five years.

Tax-free earnings are a huge benefit in accumulating resources for retirement. In fact, with the exception of municipal bonds, you can't find tax-free earnings on any other type of investment.

In short, you'll find that a Roth IRA is a valuable tool in constructing your retirement portfolio. Furthermore, although the Roth IRA is first and foremost a retirement plan, it's also flexible enough to be used for other purposes. For example, you may be able to tap into your Roth IRA to help pay for qualified higher education expenses. You can do this in one of two ways:

* First, you can withdraw your Roth IRA contributions at any time, free of taxes and penalties.

* Second, you can withdraw earnings that have accumulated in your Roth IRA. This money won't be subject to the 10 percent early withdrawal penalty, but it will be taxable. Because of this, you'll need education-related Roth IRA withdrawals.

Qualified higher education expenses typically include tuition, fees, room and board, books and other supplies, and there's no dollar limit on the educational withdrawals you make from your Roth IRA. You can withdraw and spend as much as you want.

Also, because the Roth IRA is in your name, as the parent or the grandparent, it won't count against your children or grandchildren in determining their financial aid package.

Despite the benefits of using your Roth IRA to help pay for college costs, there are some potential issues to consider. We've already looked at the tax implications, but even if you withdraw only your contributions, and you don't take a tax hit, you still are "paying" for these funds in another way. Specifically, any money you take out for education will be available to you for retirement -- which is, after all, the main reason you opened your Roth IRA.

So, in the final analysis, you'll have to balance the benefits of the Roth IRA as a college-funding source against the loss of retirement dollars. Your ultimate choice depends on your individual circumstances. Of course, the more sources of income you have -- for both college and retirement -- the more flexible you can be in your decision-making. That's why it's essential to start building your college and retirement funds as early as possible. The more you save, the more attractive your choices will be.