401K to pay Tuition Forum

[itsmytime10]

As a series 7/63 licensed broker...I can tell you this is an incredibly DUMB idea.

Would you mind elaborating? Why is it a dumb idea?

If you roll your 401k into an IRA, you may withdraw from the IRA, without the 10% penalty, for law school tuition expenses. You will, of course, have to pay income tax on what you withdraw. However, you would have to pay income tax on that money in your retirement anyway, when you will (should) have a much higher total income than you have in law school. And, given the direction that our Social Security and Medicare systems are headed, federal income taxes are probably going to be much higher 30 years from now.

It seems to make sense to withdraw from an IRA to pay for tuition expenses, particularly if doing so helps you avoid having to take out Plus loans (with their 8-9% interest rate). What am I missing?

Unless your 401k is HUGE, I'd say it is a mistake to use your retirement money to pay for lawl school. Of course, if your like 25 years old, then i suppose that makes a difference because you would have a much greater amount of time for your law school investment to pay off.

My $0.02

I would rather have 0 in retirement and as little debt as possible. I have a long time to restock that retirement fund after law school. And if i can avoid those grad plus loans at 8-9% then i can even add more to my retirement account. I lot of people say that this is a bad idea but i really doubt that they have thought much about it.

[vlsorbust]

I would rather have 0 in retirement and as little debt as possible. I have a long time to restock that retirement fund after law school. And if i can avoid those grad plus loans at 8-9% then i can even add more to my retirement account. I lot of people say that this is a bad idea but i really doubt that they have thought much about it.

Even if withdrawing from IRA doesn't carry the same penalty as 401k, I think you still have to pay taxes on the amount you withdraw, right? I know how tempting it is to use retirement funds to pay for school - that thought even briefly crossed my mind - but I think a previous poster had a good point about having annual limits on catch-up contributions. You could very well be kicking yourself later.

Have you thought about actually going through and crunching the numbers (either with or without a financial advisor) to see what your 401k/IRA could be making three years from now, if you left it alone? If you really looked after your investment - or asked someone to do it on your behalf while you're studying your heart out - you may be surprised at how much money you could be earning. Sure, it's scary to think about all that debt, especially with the unpromising job outlook for attorneys, but what about LRAP? Or maybe you'll get lucky and score a decent job right out of LS so that you can pay back the debt in a reasonable amount of time. Or if you have great credit (or know someone with great credit who would be willing to co-sign), you could get a differnt kind of loan with a lower interest rate.

FWIW, I actually HAVE thought a lot about it, and I still think robbing Peter to pay Paul is a bad idea in practically any situation.

[eLegal]

Have you checked out this law school scholarship finder on AdmissionDean ( http://www.admissionsdean.com/paying_fo ... hip-finder ). It looks like they have created a database of outside scholarships that can be searched using different criteria. I find it pretty shocking that there's so much money out there just for the asking.

HTH