Comments on: What is the procedure to use my 401k funds to pay for my college expenses ? http://www.iraroth.net/2009/12/what-is-the-procedure-to-use-my-401k-funds-to-pay-for-my-college-expenses/ IRA Questions and Answers Thu, 19 Aug 2010 02:28:19 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Steve D http://www.iraroth.net/2009/12/what-is-the-procedure-to-use-my-401k-funds-to-pay-for-my-college-expenses/comment-page-1/#comment-128 Steve D Tue, 08 Dec 2009 20:16:46 +0000 http://www.iraroth.net/2009/12/what-is-the-procedure-to-use-my-401k-funds-to-pay-for-my-college-expenses/#comment-128 The easiest thing to do would be to roll over the 401(k) into an IRA. Not all 401(k)'s offer hardship withdrawals (all IRAs do) and you may still be subject to the 10% penalty under the 401(k) (but not under the IRA). Also, check your company's vesting schedule. If you are not vested within two years, there is no advantage to contributing to the 401(k) as your withdrawal will be taxed at ordinary income levels (though going full time may lower your tax bracket, saving you a little money) and you will not receive the employer match. The easiest thing to do would be to roll over the 401(k) into an IRA. Not all 401(k)’s offer hardship withdrawals (all IRAs do) and you may still be subject to the 10% penalty under the 401(k) (but not under the IRA).

Also, check your company’s vesting schedule. If you are not vested within two years, there is no advantage to contributing to the 401(k) as your withdrawal will be taxed at ordinary income levels (though going full time may lower your tax bracket, saving you a little money) and you will not receive the employer match.

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