Tapping 401k

that is a positive!
but.....it could double in 6 months. mine did from march to june i think it was.

 

If you roll it over to an IRA there is no penalty and you can take withdrawals for education. Just fill out a form from the institution that is managing it and save all of your receipts for all education expenses. You may have management fees to pay, like deferred commissions on mutual funds, so if you roll it over into an IRA, keep it in some type of cash account. I used some IRA money recently to cover some education expenses. Talk to an IRA professional at your bank and let them know what you are planning on doing so it gets set up correctly from the start. The taxes will be figured on the year in which you make the withdrawals, so plan that carefully as well if you will be tapping into it near the end of the year.

I would pinch those pennies very tightly. It is what you are saving for when you can't or don't want to work anymore. Also, apply for a student loan. I just got $2000 for truck driving school and I also have veterans' benefits paying for most of my tuition. I only took about $800 out of one account for books.

 

No problem. I know what you are driving at.

I was trying to keep it simple for the 22 year old person that posed the original question based on the circumstances that he posted.

But as we get older we (hopefully) become wiser.

His down side is minimal with a cash out at his age and the invest amount in question.

Now I'll grant you that with compounded interest over the next 40 years, it might be to his benefit in the long run to leave the money where it is, but there are far too many variables to make a definative decision based on what " may happen".

 

This is why it is best to consult a financial professional who knows your specific needs. I used to work in the financial services business, but have let my licenses lapse about 6 years ago. Find someone you trust and make sure they don't talk you into buying something you don't need, like a mutual fund, because it ups their commission, instead of helping your immediate need.

 

There are different rules on closely held corporations for vesting. It is to protect the employees that work for these operations.

If he touches the funds, he has 60 days to make a tax free rollover into an IRA to prevent a taxable transaction.

The amount drawn from the 401 K is subject to the regular income tax rate that is achieved when the proceeds are added to the income. A tax of 10% of the proceeds is then added to the tax due on the return.

 

Unless the funds taken from the IRA are used for education expenses. Then there is no penalty.

 

I had not gotten to your post.

You are correct on the educational requirement, but strict documentation is needed to protect the exemption.