Saving for our children's
future education is important but saving for retirement should
take priority. Financial professionals remind us there are
multiple ways to assist in funding an education but there are no
scholarships, loans or financial aid to fund our retirement!
Most parents are not willing
to trade their ability to retire for a child's education and
with a little planning a family's financial plan can include
both goals. However, retirement funding must be considered a
priority. None of our financial goals stand alone; they all need
to be part of a comprehensive family financial plan.
That being said, the
government does allow some retirement savings accounts to be
used for education expenses without assessing a penalty for
early withdrawal.
Traditional IRA -
The early withdrawal penalty of 10% does not apply if the
withdrawal is used to pay qualifying education expenses. Income
taxes may need to be paid on at least part of the amount
withdrawn.
Roth IRA -
The early withdrawal
penalty of 10% does not apply if the withdrawal is used to pay
qualifying education expenses. You may owe income tax on the
earnings in the account however withdrawals from a Roth are
treated as coming out of contributions first and there is no tax
on withdrawals of Roth IRA contributions.
Before using retirement funds
for education expenses, think it through very carefully and
consider talking with a professional financial advisor before
making this decision.
Return to Saving for
Education topics:
The Value of Education
What Will It Cost?
Who's Paying?
How To Make It Happen
It's Never Too Late
Resources
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