Using retirement accounts to pay for medical school?

[peanutsss]

Has anyone given this consideration?

I'll start off by saying I understand you shouldn't gut your future to pay for current needs. However, with the current interest rate of Stafford/Grad-Plus loans rivaling the last 100 years of S&P 500 annualized returns, it seems worth looking at (not even considering my lack of faith in the market for the next 4 years).

It seems that one could roll a 401k or company stock plan into a Roth IRA after leaving their job, pay reduced taxes (due to reduced income) and withdraw that money without penalty for educational expenses. Just wondering if anyone has looked into this as an option. I'm considering to pay for part of my expenses.

Thoughts?

---

Members don't see this ad.

 

[peanutsss]

.....

 

[peanutsss]

.

 

[ddmbmom]

Have wanted to visit with someone about this but didn't know who. Curious to your thoughts?

 

[peanutsss]

.....

 

[ddmbmom]

I guess I should start with my own cfp, he has held my accounts for 20 years as a Healthcare professional, duh

 

[FiremedicMike]

Has anyone given this consideration?

I'll start off by saying I understand you shouldn't gut your future to pay for current needs. However, with the current interest rate of Stafford/Grad-Plus loans rivaling the last 100 years of S&P 500 annualized returns, it seems worth looking at (not even considering my lack of faith in the market for the next 4 years).

It seems that one could roll a 401k or company stock plan into a Roth IRA after leaving their job, pay reduced taxes (due to reduced income) and withdraw that money without penalty for educational expenses. Just wondering if anyone has looked into this as an option. I'm considering to pay for part of my expenses.

Thoughts?

By the time I'm ready to start medical school, my defined benefit pension cash-out value will be about $100,000. My options are to cash it out and use it to pay tuition/living expenses or let it sit. I can't draw on the pension until I turn 48, and I would only be getting roughly $1,000 per month.

I guess my current plan is to let the pension sit until I graduate medical school (just to make sure I don't fail out), and then cash it out and immediately pay off as much of my student loan as possible. That way, if I do fail out, I can try and get back to a fire department and pick up where I left off..

 

[Meridian32]

I've done it - I'm a current 4th year medical student who worked for several years before med school. I rolled my 401k into a traditional IRA, which I've used some of to pay for part of med school tuition. I was able to do this without the 10% penalty and also without taxes. I made the rollover decision a few years ago so my memory of how I decided to do this is fuzzy now, but I do remember creating a spreadsheet to model out my net worth if I financed med school with loans + no IRA withdrawal vs. no loans + IRA withdrawal. Ultimately it's a pretty personal decision that only you can make, so I recommend running the numbers before committing. Good luck!

 

[peanutsss]

.....

 

[Meridian32]

You can indeed withdraw from a traditional IRA. These withdrawals are normally taxed as income, but since I was paying med school tuition I was able to claim the Lifetime Learning Credit of $2k that year, which canceled out the income tax on the amount I withdrew (and then some!).

 

[peanutsss]

.....

 

[Gauss44]

Has anyone given this consideration?

I'll start off by saying I understand you shouldn't gut your future to pay for current needs. However, with the current interest rate of Stafford/Grad-Plus loans rivaling the last 100 years of S&P 500 annualized returns, it seems worth looking at (not even considering my lack of faith in the market for the next 4 years).

It seems that one could roll a 401k or company stock plan into a Roth IRA after leaving their job, pay reduced taxes (due to reduced income) and withdraw that money without penalty for educational expenses. Just wondering if anyone has looked into this as an option. I'm considering to pay for part of my expenses.

Thoughts?

Sounds good with one potential drawback: Any money you withdraw from the Roth IRA, I believe, will be counted as income for the year you withdraw it. You are correct that you can pay taxes during a conversion and therefore not when you withdraw funds, and waive the penalty by using funds for education. The increase in income might impact your FAFSA and financial aid, and it might not if you speak with your financial aid adviser in advance.

 

[Gauss44]

You can indeed withdraw from a traditional IRA. These withdrawals are normally taxed as income, but since I was paying med school tuition I was able to claim the Lifetime Learning Credit of $2k that year, which canceled out the income tax on the amount I withdrew (and then some!).

I believe if you go that route, it still might bump you up to the next income tax bracket.

 

[Gauss44]

I'll start by saying Im just getting started on the process of looking into this option so I cant claim to be an expert.

Are you asking for my thoughts on the process and strategy or simply who to talk to?

If the latter, I'm looking to pay someone for a consultation, possibly a CFP. I just googled "Fee-Only Certified Financial Planner" in my area. I figure someone on a fee-only base lacks the incentive to dictate where and how I hold my money. Someone like this: (http://www.governadvisors.com/services.html) just an example from (http://www.napfa.org/)

I have a few Vanguard accounts and noticed they offer some adviser services as well. ( https://investor.vanguard.com/what-...choose-the-help-thats-right-for-you?WT.srch=1 ) . I may end up consulting both.

Sometimes it also works to just call the company holding your retirement account and see if they will answer. Sometimes they will, sometimes they won't.