I have a 2 year-old son. I have had several people suggest that I open up a 529 account to pay for college. My wife and I both pay into defined benefit pension plans (lucky me) and we also both have a 401k to supplement the pension. It seems to me that it would be easier to just use my 401k to pay for his college instead of opening up another account since I will most likely be retiring just as he starts college and I won't be relying on the 401k for my retirement income. But I know a lot can change between now and then. What are your thoughts money board?

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Posted by GoTigers23

Baton Rouge

Member since Sep 2004

405 posts

Posted on 10/26/11 at 9:59 am to TheFolker

Will you be 59 1/2 when your son starts college?

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Posted by TheFolker

Member since Aug 2011

5185 posts

Posted on 10/26/11 at 10:07 am to GoTigers23

No, but I will be retiring at age 55 and it is my understanding that you can make penalty free withdrawals from a 401k if you retire at age 55 or later. Is this correct? My son will start college the next year when I am 56.

This post was edited on 10/26/11 at 10:10 am

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Posted by guttata

prairieville

Member since Feb 2006

22508 posts

Posted on 10/26/11 at 10:21 am to TheFolker

One thing to think about would be that if you take money out of your 401k, you get taxed at your rate. If the rules end up changing and 529s do eventually get taxed, it will be at the kids' rate.

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Posted by yellowfin

Coastal Bar

Member since May 2006

97649 posts

Posted on 10/26/11 at 10:49 am to TheFolker

You should talk to a financial planner about this but in general using a 401k for college tuition is a terrible idea.

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Posted by GoCrazyAuburn

Member since Feb 2010

34885 posts

Posted on 10/26/11 at 11:35 am to TheFolker

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Posted by reb13

Member since May 2010

10905 posts

Posted on 10/26/11 at 11:42 am to GoCrazyAuburn

If more obamas get elected college will be free by the time your kid gets there. BLOW IT ALL.

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Posted by LSUAfro

Baton Rouge

Member since Aug 2005

12775 posts

Posted on 10/26/11 at 11:49 am to yellowfin

quote:
You should talk to a financial planner about this but in general using a 401k for college tuition is a terrible idea.

Terrible idea isn't the word I would use. You have to consider several things.

Up to 10k/year can be distributed from your 401k for qualified upper education expenses regardless of age without penalty.

I'd just set up a 529 direct deposit and be done with it.

This post was edited on 10/26/11 at 11:56 am

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