As college tuition costs continue to rise parents and students often struggle to raise the money necessary to afford it. There are a growing number of people who might be tempted to dip into a retirement account like a 401(k) plan to help pay for a child’s college education. “In a 2014 study, 7% of families admitted to taking funds out of a retirement account to pay for college, up from 5% the year before.” This article explains some of the reasons why taking money out of a 401(k) plan to pay for college is a bad idea. People might get hit with certain penalties or taxes if they start withdrawing funds from their account too early. Taking funds out of a retirement account to pay for a child’s college could also cause people to fall behind on their retirement savings.
See Maurie Backman, 3 Reasons Why You Shouldn’t Use Your 401(k) to Pay for College, My San Antonio, April 3, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
