It is important to make sure you are investing for your own retirement first before saving for children's college. Children and parents can most likely receive financial aid to assist with college bills.

Set Priorities

If you wish to save simultaneously for a child's education and your own retirement, you need to set goals and identify priorities. For example, if you desire to pay a four-year college education for a child in its entirety, recognize that you may need to work an extra 9 years to do that.

Retirement Plan Money

Federal financial aid formulas generally do not take into consideration money that parent(s) have invested in retirement plans like employer savings plans and IRAs.

In addition, qualified distributions in any amount from a traditional IRA that are used for higher education costs for the taxpayer, spouse, children, or grandchildren are excluded from the 10% withdrawal penalty.

All contributions from a Roth IRA can be withdrawn at anytime (in order for earnings to be tax-free, the account holder must be 59 ½ and have the account open for 5 years).