Using 401K for college expenses
How does this work? Can this be done to pay these expenses after the child has graduated?
Terry Says
That is not a solution! See why below:
You can tap into an IRA to pay for college expenses — without penalty, assuming you’re under age 59-1/2 and would otherwise be subject to a penalty. but you have to pay income taxes on the money withdrawn, and also be prepared to show proof that a family member, or yourself, is attending a qualified higher education school.
BUT you can NOT withdraw rom a 40l(k) for this purpose. In fact, you can’t withdraw from a 40l(k) for any purpose until you have left employment, unless your employer offers a hardship withdrawal program. And if you make such a withdrawal and are under age 59-1/2 you’d have to pay a 10 percent penalty, as well as ordinary income taxes.
You can “borrow” from your 40l(k) but you’re only cheating your future. And if you leave the employment and do not repay the loan, it is treated as a withdrawal, subject to taxes and penalties.
BOTTOM LINE: Don’t count on your 40l(k) to pay for anyone’s college!
