401K to IRA for Education – housing covered?
Hello,
I am leaving my job this fall and I currently have a 401k that I plan to roll over to an IRA, which I will ultimately withdraw funds from to fund my higher education (I will be working towards my BA beginning in the Spring ’08 term).
As an adult (or ‘non-traditional’) student, I am wondering if anyone knows whether I would be able to use some of this money to pay my rent and still be exempt from the 10% penalty? The schools I am looking at seem to not offer housing to the non-trad population, but I am planning to be a full-time student and a bit worried about covening my living expenses with a part-time job.
I am not sure how any of this works – can I use the IRA for housing? Or is that something I would be able to use a student loan for? Or will I just need to eat the penalty to pay my housing expenses?
Sorry this is so long; I am so confused about all this!
Thanks very much!
EMM
Permalink Submitted by Alan Spross on Thu, 2007-08-23 00:19
The exception to penalty for more than half time students does apply to room and board, however, I am attaching a paste from the IR Code which seems to suggest that off campus rent or board amounts are likely limited to something not much more than on campus dorm levels. This may take some research on your part to determine the amount that qualifies for the exception, and hopefully the school can provide you with the monthly figure. Be sure the school is an eligible one, and also be careful to coordinate your IRA distribution with the year the expenses are paid. Also be sure to move the 401k by direct transfer to avoid withholding.
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Permalink Submitted by Elizabeth Mindel on Thu, 2007-08-23 13:38
Thank you so much – that’s hugely helpful! Really appreciate the help – one less thing to worry about and distract me from the the real challenge…applications!
Thanks again!!!!!