In one year I will be going back to school to become a RN and i plan to go from working full time - to part time. I doint have a saving to pull from to live off from while working part time but i do have a 401k. I will be starting to put 10% now from my paycheck plus my employer matches 50%. When i start working part time next year should i pull from my 401k to be able to go to school and only work part time?
2006-09-25 03:16:37 · 11 answers · asked by rocco071706 1 in Business & Finance ➔ Personal Finance
Other ways to help pay for college: try financial aid from the government www.fafsa.com. Or see if your company offers tuition assistance or tuition reimbursement.
2006-09-25 03:33:02 · answer #1 · answered by Jennifer S 2 · 0⤊ 0⤋
Here's what I would do. Only put in the maximum amount that your employer matches. For instance, will they match 50% up to your 10% or will they only match your money up to a lower %. If you only put in up to the maximum amount they match, then you can put the difference between that number and 10% into a savings account for example. And you will still be receiving your maximum match from the employer (free money, who doesn't want free money!). Then you will save some after tax money for the next year and will be able to pull from that money without huges tax liabilities. If that money is not enough, you have your 401(k) and employer match to fall back on (maybe see below). When you withdraw money from your employer's plan under the circumstances 20% in federal income tax will be withheld from any distributions over $200. The distribution is also taxable at your normal income rate. If you are under age 59 1/2, you will be liable for an additional 10% penalty when you file your taxes. Another thing to note is that if you are still working for this same employer part-time, you may not be eligible to get your money out. It all depends on the terms of the plan. Generally, distributable events are death, disability, retirement and separation from service. You need to find out what the rules of the plan are.
2006-09-26 22:35:51 · answer #2 · answered by ajillity 3 · 0⤊ 0⤋
I wouldn't! Any dollar you remove from a 401k before you're 59 1/2 years old incurs a penalty of 10% PLUS you pay taxes on it! Better to put your money now into a savings account if you want to use it next year. At least you'll be able to withdraw it dollar for dollar instead of only getting maybe 70 cents on each dollar.
Example:
Withdraw $15000 from a 401k (prematurely)
Subtract 10% right off the top-$1500 = $13500
Then, subtract your taxes, assuming 20%, = $2700
From your original $15,000 you now have $10,800
It's just not smart!
2006-09-25 10:29:42 · answer #3 · answered by barbiehow 3 · 0⤊ 0⤋
You cannot pull from your 401(k) if you are not working. You will have to close the account. In that case, you will end up paying the taxes as well as a penalty (it is to discourage people from closing the account). If you are working part-time for the same company, you can take a loan from your 401(k) which will then be deducted from your paycheck. If you have to close, you will have to prove hardship and that you have exhausted all other measures.
it is better to apply for a student loan.
2006-09-25 10:32:35 · answer #4 · answered by worldneverchanges 7 · 0⤊ 0⤋
DEFINATELY NOT!!! Go for a student loan. You have a head start on a retirement fund even if you don't put another dime into it, it will compound and grow. The taxes and early penalties will remove any advantage you may think you have. That employer match of 50% is free money. Don't waste it. If things are that bad, sell plasma. :)
2006-09-25 10:34:28 · answer #5 · answered by Anonymous · 0⤊ 0⤋
You may want to talk to someone (financial advisor) this becasue I do believe that you can use some of your 401K for education. But if not the distavantages are you are penalized 10% and you still are responsible for both state and federal taxes at the end of the year.
2006-09-25 10:22:09 · answer #6 · answered by Anonymous · 0⤊ 0⤋
I believe that there is a 20% penalty for withdrawing from a 401k PLUS the tax implications.
I would take a loan out or see if there any grants out there for nurses. You will be paying a lot out for a 401. Could you use a home equity?
2006-09-25 10:21:00 · answer #7 · answered by words_smith_4u 6 · 0⤊ 1⤋
Ordinary income tax rates plus a 10% penalty if you withdraw money out.
2006-09-26 16:28:21 · answer #8 · answered by Steve R 6 · 0⤊ 0⤋
There will be penalties to pay, and usually they are pretty large. After they deduct their fee, you're not left with much. Try other options before you pull money out of your 401(k).
2006-09-25 10:25:49 · answer #9 · answered by chocolate-drop 5 · 0⤊ 0⤋
There will be a IRS penalty and taxes to be paid - reduces your retirement benefits - good luck!@
2006-09-25 10:24:35 · answer #10 · answered by nswblue 6 · 0⤊ 0⤋