Hack #3: Use a Roth IRA to Save for College

This hack is useful if you're saving for a child's college tuition because it gets around the limited use of 529 accounts. That said, Roth IRAs do come with income limitations: You can contribute to a Roth IRA to the limit if your adjusted gross income is less than $112,000 filing alone, and $178,000 if you're married, filing jointly, so consult your tax advisor before giving this idea a try.

How It Works: A 529 plan is a state-run college savings account (you can look into the particulars of your state's program here). It's not federal income tax-deductible (although some states let you to deduct some of your contributions on your state income taxes), but it does allow you to pull out funds for college tax-free. The downside of a 529 plan is that if and when you apply for financial aid (by filling out the FAFSA form), the money in this account is considered part of the family's assets. For some families, having savings in a 529 counted as an asset lessens the chances of getting financial aid.

One of the things that we say again and again is that you shouldn't take money out of a retirement account. There are penalty fees, and it's basically self-sabotage ... with one exception. That exception is withdrawing the principal—the money you contributed, and not the interest it has earned—from your Roth IRA.

We don't generally recommend this maneuver, but if you're in a tight spot, it might work for you. Money saved in retirement accounts doesn't count toward a family's assets, so you can save money for college in a Roth IRA, apply and possibly qualify for financial aid without declaring those assets, and then withdraw those savings when it's time to pay. For example, you and your spouse could each contribute $5,500 (the maximum contribution for 2013) for a total of $11,000 a year for the both of you. In 15 years, your principal will be $82,500, which you can withdraw to pay for college without penalty.

Something else to know: Retirement accounts are generally creditor-protected, so they can't be seized by creditors—with 529 accounts, the rules vary by state.