Languages

Support on this site for Internet Explorer 7 and Internet Explorer 8 will end on April 26, 2017. You must update your browser prior to then to continue accessing ubt.com and UBTgo Online Banking. Learn More Here >>

Ask a Trust Officer: Tapping Retirement to Pay for College

May 11, 2017

Retiring Your Way, Growing Your Wealth, Managing Your Money

Articles

 

DEAR TRUST OFFICER:

Should I withdraw or borrow from my 401(k) plan to help pay for my child’s college expenses?
—PUZZLED ON FUNDING

DEAR PUZZLED: As a general rule, impairing your retirement savings to meet current spending needs is not a good idea, even for higher education expenses. There are other sources of funds for education needs—in contrast, in retirement, when one is on a fixed income, borrowing to meet expenses is problematic.

What you take out of your plan now can be hard to replace later. It’s been estimated that it can take six to ten years to fully restore a retirement account that has been tapped to meet four years of college expenses. In part, that’s because one misses out on the compounding of investment income during the period. For longer time frames, the stock market has produced higher total returns than the interest rates on student loans. The other part is that it can be hard to get back into the saving habit.

The better approach is to save for higher education early, separately from retirement savings, so as to put time on your side and minimize the need for loans when the college years arrive.

Do you have a question concerning wealth management or trusts? Send your inquiry to Doug Koenig or Leslie Gibbens or call 402.323.1324.

 

© 2017 M.A. Co. All rights reserved.

 

Back to Top

Add new comment

This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.


Investment products: Not FDIC Insured - No Bank Guarantee - May Lose Value.