Retirement funds tapped for kids' tuition

[harun]

Source: CNN

WASHINGTON (CNNMoney.com) -- Nearly a quarter of the nation's parents saving for their children's college education intend to raid their own retirement accounts, despite increasing their tax liability, according to a new study released Tuesday.

Some 24% of parents said they planned to save for college by dipping into retirement accounts, such as 401(k)s, IRAs and pension plans. The same percentage, 24%, said they plan to use 529 accounts.

Read more: http://money.cnn.com/2010/10/05/news/economy/Sallie_Mae/index.htm?hpt=T2

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Federalizing the Student Loan program was a good start. Would like to see Obama push some serious legislation through Congress to battle rising costs of higher education. Items like forcing schools to use the same editions of books for a class for five years (as opposed to changing them every year and making the kids buy all new books), better tax deductions for married couples where one of them is working and one is attending school, etc.

[laureloak]

1. Do they even need textbooks?

I mean, really, how frequently does history and math change?

[harun]

4. I agree, most of the basics should just have digital versions available for students to

download. Then have supplementals. I would hope an edition lock like I suggested would push schools further in that direction. Have free digital editions of the latest and greatest, then have the primary hard copy locked at least for five years so people would at least have some used editions for some classes they could buy to save money on.

[awoke_in_2003]

9. no money to make that way...

and the book companies pay off the decision makers at the colleges.

[laureloak]

18. Nothing works when private business interferes with government.

[Ruby the Liberal]

2. I would highly recommend looking into 529 plans for anyone considering this.

In the case you mention of a working spouse and a student spouse, the 529 can still apply.

[harun]

3. Didn't know that at all. Thought you had to have kids.

[Ruby the Liberal]

17. Depends on the plan

Some, like Coverdells are limited to what age they have to be used.

You can even fund your own education with the right 529. It depends on what state you live in. Check with a financial advisor licensed in your state to get the specifics.

[FBaggins]

5. Retirement accounts can be a reasonable source of college funding.

IF that's part of your financial plan.

You don't pay a penalty for withdrawals for post-secondary expenses. You pay taxes of course, but you'll do that at retirement as well.

The key is whether this was the intended use for those funds. If that's money that has always been targeted at retirement, there's a problem.


The different between this and a 529 (assuming no special state tax treatment) is similar to the difference between a Traditional IRA and a Roth IRA.

[harun]

6. And you see no problem in tuition being out of the reach of nearly all the Middle Class?

[FBaggins]

7. Assumes facts not in evidence.

The article doesn't demonstrate that claim (though it's certainly a reasonable one). It's about how people plan to save for college. It isn't even how they're making the payment now.

My wife and I fall into that category. When we had kids, we mentally tagged her retirement account as the seed money for college (with new contributions going to a 529). IOW, the funds are in a "retirement" account, but they aren't for retirement.

The increasing cost of tuition is certainly an issue worth discussing (though it hasn't gotten close to the "out of reach of nearly all the Middle Class" point yet), but it isn't a part of the article.

[Common Sense Party]

8. No. No. NO!

Don't jeopardize your own retirement to send kids to school.

The kids can work and get loans and scholarships.

[FBaggins]

10. You're right of course... but that doesn't appear to be what the article is saying.

It reads as if a small percentage of people intend to use IRAs as part of their college planning.

As I said above, if the money is for retirement you're entirely correct. If the money is for college and just happend to be IN a retirement account (for the tax benefits), it isn't a problem.

[TBF]

12. Where are they supposed to find work with double digit unemployment? nt

[Common Sense Party]

13. Quite often, on campus.

[TBF]

14. That worked when I was in school and paid $800/semester -

not sure if minimum wage can come close to meeting the tuition of today's colleges.

[Common Sense Party]

15. I never said it could. Work is ONE element. Loans are another.

The truth holds: DON'T sacrifice YOUR retirement for your kid's college. You CANNOT make up for lost time.

[LanternWaste]

16. Or across county or state lines being just as likely too...

Or across county or state lines being just as likely too...

[cilla4progress]

11. CHEGG!

Texts are a complete ripoff. Use CHEGG for used books at micro-percentages of original costs (eg, $32 v. $200). Check it out online!