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Parents Break Into Retirement Accounts to Pay for College
Filed under: In The News, Research Reveals: Teens
Do you really want to drain your retirement fund to pay for your kid's education? Credit: Getty Images
Sound like you?
If so, it's a growing club. According to U.S. News & World Report, some 6 percent of parents decided to break into their retirement accounts this year to help send their children to college.
That figure is up from 3 percent in 2009, and, the report says, the average amount withdrawn from 401(k)s, IRAs and other retirement accounts jumped from $5,318 in 2009 to $8,554 this year.
While money in IRAs can be used for college expenses, you can't withdraw money from 401(k)s -- at least not without paying 10 percent or more in early withdrawal penalties.
The magazine reports IRA money qualifies for an exemption for room and board expenses if the child is at least a half-time college student. IRA owners still have to pay income tax on withdrawals. Roth IRA owners younger than age 59½ must pay tax on the portion of the withdrawal that comes from investment earnings.
College costs might qualify for a 401(k) hardship withdrawal if employees can demonstrate an immediate and heavy financial need for the money and show that other sources of income have been exhausted, the magazine reports.
Parents who earn more than six figures a year generally withdrew the most from their retirement accounts, according to the magazine. And families generally used more of their retirement to pay for private colleges than public schools.
Parents with a child attending a private college withdrew an average of $1,254 from their retirement accounts in 2010. In contrast, families with a student at a public school withdrew an average of $414 for a four-year college and $241 for a two-year institution.
Who needs a nursing home where they change the linens every single month, anyway?
Related: Saving for College? Plan Ahead
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ReaderComments (Page 5 of 5)
9-07-2010 @ 8:44PM
Alan said...The Wealthy have Robbed our Country of it's Future and Our Country's Wealth and want the United States Flooded with the illegal immigrants to drive DOWN Wages and continue Robbing the People of Our Little we have left. Why do you Play into the GOP/ BIG BUSS. GAME.. Hey! REPUBLICANS....... HEY! DEMOCRATS ...... I am A Voter!.... YOU ARE SUPPOSE TO SERVE ME AND MY FELLOW CITIZENS WHO NEED JOBS FOR AMERICAN CITIZENS. You Have to BREAK from the PACK of WOLFS WHO KEEP SCREWWING My Family and ME.
I'm NOT Proud of Any One of You.
Charity Starts at HOME, Where is YOUR COMPASION for the Citizens of ALL 50 of The UNITED STATES.
How about Our Children, American Children who's parents earnings are barely paying Rent, Mortgage, Food.
and NOT on WELFARE. WE The People are Becoming HOMELESS by the THOUSANDS EVERYDAY and EPIDEMIC is HERE.
A.R.
RI
Reply