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Straight Answer: 401K to pay for MBA Tuition Penalty Free?

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Straight Answer: 401K to pay for MBA Tuition Penalty Free? [#permalink] New post 27 Mar 2012, 08:59
I need a straight Yes/No answer. Can you pay for your MBA Tuition from your 401K Savings, Penalty (10%) free?

Yes/No?
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Re: Straight Answer: 401K to pay for MBA Tuition Penalty Free? [#permalink] New post 27 Mar 2012, 10:07
From my research if I remember I came to the conclusion that I can roll over the 401k to an IRA then use the IRA to pay for tuition for qualified higher education expenses without the 10% penalty. Qualified higher education expenses I believe was limited to Tuition and Room/Board.
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Re: Straight Answer: 401K to pay for MBA Tuition Penalty Free? [#permalink] New post 03 Oct 2013, 22:17
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I will post the rules from the IRS website below. Before I post, I wanted to say that the advice provided by aalba005 is correct. Based on the tax rules, there is a 10% early withdrawal penalty from 401k plans and other non IRA plans with no higher education exemption. However, if you roll-over the 401k or other retirement plan into a Roth IRA or traditional IRA there is an exemption for the 10% penalty on higher education expenses. So it seems like with many tax/accounting questions the answer is a Yes and No depending on the circumstances. Yes - Penalty for 401k, No - Penalty for Roth IRA/IRA. Here are the links to the IRS topic discussions

Topic 558 - Additional Tax on Early Distributions from Retirement Plans, Other Than IRAs
http://www.irs.gov/taxtopics/tc558.html

Topic 557 - Additional Tax on Early Distributions from Traditional and ROTH IRAs
http://www.irs.gov/taxtopics/tc557.html
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Re: Straight Answer: 401K to pay for MBA Tuition Penalty Free?   [#permalink] 03 Oct 2013, 22:17
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Straight Answer: 401K to pay for MBA Tuition Penalty Free?

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