You probably already know about 401k's since you found this article. Just in case, a 401k is a retirement account that you can put money into through your employer. You can then withdraw this money after you retire to live on.
If you have certain hardships, you can access the money sooner. I'll explain a few ideas about the 401k hardship rule tuition withdrawal, specifically for paying for college tuition and related expenses with this money.
You can only withdraw from a 401k if you have deposited money into it. Some employers will match your contributions or deposits with some of their own money, helping yours to grow faster. Usually these added deposits aren't yours until a few years after you get the job. You can refer to that as vesting or how long it takes to become vested. The money you put in is always yours, unless your investments lose value.
The Basics of Hardship Withdrawals
The IRS has a bunch of categories for taking money out classified as approved hardships. The categories include medical care, buying a house, preventing foreclosure or eviction, some types of damage to your house, funeral and burial expenses, and educational expenses for post secondary expenses for the next 12 months of school.
Here is the simple explanation of the 401k hardship rule tuition withdrawal:
Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the employee, or immediate family (spouse, children or dependents).
You should verify with your retirement account management company, but usually you can withdraw money if it is to continue working on your degree.
Also, notice the phrase included above that says you need to use the money for post-secondary education. What qualifies as post-secondary education? Going to college for any degree after high school at a college or university qualifies as post-secondary. Also, certificate programs usually meet the requirement, and most vocational programs also fit the bill.
As a key to the post-secondary requirement of the 401k hardship rule tuition withdrawal, just determine if you need a high school diploma or a GED. If so, it nearly always meets the requirement and you can use a 401k withdrawal to fund it.
Be Careful With 401k Money
I'd like to remind you that you spent some time building up that 401k, so don't spend the money unwisely. For instance, making a withdrawal just to take a class for fun. You should save that money if at all possible.
You can look at using retirement money like any other investment in real estate or mutual funds. When you get more education, you should expect an increase in your earnings, and then you can increase how much you put back into the account. Now suppose the classes don't increase your earnings, or perhaps one of your children to get a better job. Then you might look instead for some other money to cover the classes.
When you can't find money for school using a low interest student loan, maybe the retirement fund can help. Or if you don't get approved for a Pell grant, or if the grant comes back too small for your needs would be another possible reason.
And if you had a scholarship doesn't work out like you thought it would, or maybe you don't get yours renewed. In those cases and similar tough situations, a 401k hardship rule tuition withdrawal can really help. But remember, a hardship withdrawal cuts into your future, so plan to use as little as possible. You'll want the money some day. Plan to keep it in your account today unless you can't find another way.
Kevin Ihrig has sinced written about articles on various topics from 401K, Careers and Job Hunting and Education Toys. And if you need money for college but don't know a FAFSA from an EFC, come to Beat-Tuition.com to download my free short report o. Kevin Ihrig's top article generates over 3600 views. Bookmark Kevin Ihrig to your Favourites.
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