Discussion:Early withdrawal of retirement funds for higher education
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(Difference between revisions)
| Revision as of 02:24, 21 November 2008 CarlLaFong (Talk | contribs) (Have your client) ← Previous diff |
Revision as of 18:41, 23 November 2008 Lmcdon9822 (Talk | contribs) (Depending on the) Next diff → |
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| {{ForumReplyPost|UserID=CarlLaFong|Date=21 November 2008|Text=Have your client quit his job, or ask the employer to terminate the plan. The distribution can then be rolled into an IRA.}} | {{ForumReplyPost|UserID=CarlLaFong|Date=21 November 2008|Text=Have your client quit his job, or ask the employer to terminate the plan. The distribution can then be rolled into an IRA.}} | ||
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| + | {{ForumReplyPost|UserID=Lmcdon9822|Date=23 November 2008|Text=Depending on the 401(K) plan, you can roll over "in-service" funds to an IRA when the client is still working.}} | ||
Revision as of 18:41, 23 November 2008
Discussion Forum Index --> Basic Tax Questions --> Early withdrawal of retirement funds for higher education
Discussion Forum Index --> Tax Questions --> Early withdrawal of retirement funds for higher education
| 20 November 2008 | |
| One of the exceptions for the 10% penalty on early withdrawal of an IRA is when such funds are used for higher education costs. However, such exception doesn't apply to a qualified retirement plan such as a 401(k). It there any tax law which would prevent an individual from rolling over a portion of his 401(k)to an IRA, and then shortly thereafter using such funds for higher education costs, in order to avoid the 10% penalty? | |
| 20 November 2008 | |
| no, the problem would be the plan documents that might prevent an in-service distribution if the taxpayer is still working | |
| 20 November 2008 | |
| There is a bigger problem. To take a distribution while working you must generally demonstrate "hardship". Hardship withdrawals are NOT allowed to be rolled over. IRC §402(c)(4)(C)
It is unknown why Congress legislates these differences but your plan is not permitted. | |
| 20 November 2008 | |
| No problem if the taxpayer quits his job. Who wants to work and go to school at the same time anyway? | |
CarlLaFong (talk|edits) said: | 21 November 2008 |
| Have your client quit his job, or ask the employer to terminate the plan. The distribution can then be rolled into an IRA. | |
Lmcdon9822 (talk|edits) said: | 23 November 2008 |
| Depending on the 401(K) plan, you can roll over "in-service" funds to an IRA when the client is still working. | |
