Hi and welcome to Just Answer!You are correct - because your original contribution into Roth IRA is made with after tax funds - the distribution of the principal is subject of neither income taxes nor early distribution penalty.Moreover - there is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. According to these rules - your regular contributions are considered distributed first. That means - if for instance - you have in Roth IRA account $10,000 of regular contributions and $800 in earnings - and if you request $10,000 to be distributed - that amount will be classified as a distribution of your original contribution and as such will not be taxable.
If you receive a distribution from Roth IRA that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions. A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and2. The payment or distribution is:a. Made on or after the date you reach age 59 1/2,b. Made because you are disabled (defined earlier),c. Made to a beneficiary or to your estate after your death, ord. One that meets the requirements for the First home buyers (up to a $10,000 lifetime limit).
Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.Exceptions. You may not have to pay the 10% additional tax in the following situations.--You have reached age 59 1/2.--You are totally and permanently disabled.--You are the beneficiary of a deceased IRA owner.--You use the distribution to buy, build, or rebuild a first home.--The distributions are part of a series of substantially equal payments.--You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.--You are paying medical insurance premiums during a period of unemployment.--The distributions are not more than your qualified higher education expenses.--The distribution is due to an IRS levy of the qualified plan.--The distribution is a qualified reservist distribution.
While Roth IRA funds MIGHT be used to pay college education expenses - the purpose of having Roth IRA is to save for retirements - not for college education.529 plans are specially designed for education. There are some advantages - in particular - some states allow deductions for state income tax purposes, some plans allow to lock education costs, etc. However - funds in 529 plans belong to the child - so if your child will be eligible for subsidized loans or educational aid - that might work against your child's eligibility.