Taking IRA/401K money for college

[Anonymous]

Hi,

we are mid 40-s with first child going to college next year. We have relatively large retirement balances, and only about 1/7th of that sum in brokerage/savings. We can probably cash flow college payments (talking $65K/year max college), but the idea is to take some of it from retirement.
Here are reasons :
- not punishable except taxes
- all our 401Ks will still be fully funded plus employer match, i.e. they wills till continue to grow
- any extra beyond our 401K contributions we can put in brokerage to grow, but this will allow us to grow our easily accessible money in case we decide to retire earlier or scale down working BEFORE actual retirement age when 401K/IRAs become accessible for us.

I.e. the idea of depleting after tax brokerage/savings means we are limiting our ability to semi-retire earlier.

Opinions?

[Anonymous]

I can't follow what you are saying as to where you'd take money from when, but on the surface I don't understand how this makes sense.

Why not just lower contributions to the employer match amount to start?

When are you trying to retire?

[Anonymous]

PP is right. If this makes any sense at all then it makes sense to cut back current contributions first.

[Anonymous]

How much do you have in your 401ks? If you can cash flow college, that's better. Let your 401k grow. Cut back current contributions as necessary. Many colleges don't include 401k balances in financial aid calculations. Is your income low enough to qualify for aid?

[Anonymous]

Anonymous wrote:Hi,

we are mid 40-s with first child going to college next year. We have relatively large retirement balances, and only about 1/7th of that sum in brokerage/savings. We can probably cash flow college payments (talking $65K/year max college), but the idea is to take some of it from retirement.
Here are reasons :
- not punishable except taxes
- all our 401Ks will still be fully funded plus employer match, i.e. they wills till continue to grow
- any extra beyond our 401K contributions we can put in brokerage to grow, but this will allow us to grow our easily accessible money in case we decide to retire earlier or scale down working BEFORE actual retirement age when 401K/IRAs become accessible for us.

I.e. the idea of depleting after tax brokerage/savings means we are limiting our ability to semi-retire earlier.

Opinions?

Do not pull from retirement for college!!!

You can cash flow $65K. So find a college for your kid that will cost less than that, either as the regular price or with merit. Then your kid can contribute $10K (summer job, PT job at college) and take $5K in fed loans. So you need a school under $80K But I'd stick with the $65K and be done.

[Anonymous]

It's a terrible idea. So is going to a college that costs 65k per year when you don't have money saved for it. Youe kid needs to find a cheaper school so you don't have to pull from your 401k or saddle them with debt.

[Anonymous]

You're in your mid-40s. If you are taking money out of a retirement account that is not a Roth (or if it is a Roth and you're taking out earnings, not contributions), you are paying not only taxes but penalties. This is one of the dumbest ideas in the history of ideas.

[Anonymous]

You have to look at your specific situation. I don't think it's worth paying a 10% penalty, for example. Here are some potential options:

--Direct current contributions to retirement to a 529 plan now so you can save up for tuition which will be due in July or August of next year.

--Pull contributions from a Roth IRA; remember, though, you will lose room in this account forever

--Pull any amount from a Roth IRA that has been open for more than 5 years; same problem as above

--Pull from your taxable account and consider SEPP payments from your 401k at age 55 (https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments)

--Reduce your expenses and cash flow college

If you really do have enough to be considering retiring early in your 40s, then I suspect you can come up with a good solution where you don't pay a penalty. I do question why you have not made a plan for college until your child is 17, though. Without solid numbers, I can't give you more advice, but happy to help if you post specifics. I don't believe dying with the most money in the graveyard is a worthy goal. Savings is deferred spending and now you have a reason to spend. You just want to find the optimal way to spend it without paying more than you must or stealing from your future life.

[Anonymous]

I retired in my mid 40s thanks to NOT having a 401k. 401k past match was you mistake.
Leave that account alone now. I wouldn't even contribute up to the match, but you should.
Get a second job if you think you kid deserves to go to such an expensive school. Tell the kid to get a job. Restaurants are hiring.
Time to send your money into regular investment account and buy good ETFs forever.
DC started college with 30 credits in-state. They would never dream of going to $65k school even though we have money.
How does one grow up to expect that?