reb123 Posted December 29, 2015 Share Posted December 29, 2015 Any current students or practicing PA's that can lend some advice on what to do with my 401k while in school? Better to let it sit in an IRA or look into cashing it out without penalty by claiming it for use on education expenses? Sent from my SM-G900V using Tapatalk Link to comment Share on other sites More sharing options...
fishbum Posted December 29, 2015 Share Posted December 29, 2015 Well I'm not a financial advisor, but... The historical average rate of return of the stock market is about 7%. The interest rate on Grad PLUS loans is 6.84%. I would expect that once you've accrue interest during school and that interest accrues interest, etc for a couple of years, you'll probably come out ahead by using the 401(k) money to pay for school rather than borrowing. You'll probably be in a better tax situation for cashing out retirement accounts than most, simply because you'll be doing it in a year when you don't have much (or any) other income. If I'm not mistaken, using the money for education expenses won't incur the early-withdrawal penalty either. Link to comment Share on other sites More sharing options...
MT2PA Posted December 29, 2015 Share Posted December 29, 2015 Mine are all just hanging out in their 401k accounts. I didn't even bother to roll them into an IRA. There isn't enough for me to cover the cost of school and I like knowing that while I'm headed to debt I have something saved up for later in life. There are a lot of variables so there is no right answer. Link to comment Share on other sites More sharing options...
GreyhoundGirl Posted December 29, 2015 Share Posted December 29, 2015 I'm planning on cashing out my rather small 401k to help with school. How would I go about claiming it is for educational purposes? Link to comment Share on other sites More sharing options...
fishbum Posted December 29, 2015 Share Posted December 29, 2015 I'm planning on cashing out my rather small 401k to help with school. How would I go about claiming it is for educational purposes? If I'm not mistaken, you'll need to roll it to an IRA first (if you're leaving an employer, this shouldn't be a problem)...I'm pretty sure that using IRA money for education is penalty-free but the 401(k) is not. Beyond that, I don't know which forms you'd need to use at tax time, but I'm sure a competent preparer would know how to handle it. Link to comment Share on other sites More sharing options...
bananapeppers Posted December 29, 2015 Share Posted December 29, 2015 I do a lot of research and reading on personal finance and I highly would NOT recommend you pulling money from your 401k to pay student loans. The reason being is NOT only do you get taxed for it but you also get a penalty for withdrawing early from your 401k. They say after all the fees, it's about 30% that they take out. I highly recommend you check out the personalfinance section from reddit subthread and read up about 401k and student loans. Unless you're going to go bankrupt, never pull from 401k. Link to comment Share on other sites More sharing options...
GetMeOuttaThisMess Posted December 29, 2015 Share Posted December 29, 2015 Early withdrawal of a qualified retirement account incurs a 10% penalty in addition to your personal tax rate. Link to comment Share on other sites More sharing options...
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