Withdraw 401k for living expenses while in school?

Alor14582 · Jun 22, 2015

I would like to hear also. I have a friend that told me to never touch my 401 k. I guess it would be all about the numbers.

amoLucia · Jun 22, 2015

Do you have a tax consultant or a financial/investment planner? Am NOT being smarty pants here as it does sound rather hoity. But I needed a consultant when I bought my condo and he has given me info on other financial things.

BeachsideRN, ASN · Jun 22, 2015

I did this when I was in grad school the first time around to get my MPH. I do NOT recommend this method AT ALL ... you will be better off in the long run with the "high interest" loans. You get hit with a MAJOR penalty when you withdraw and then again when you file your taxes.

ETA: you basically end up with 50% value once it's all said and done with fees, taxes and penalties

grandpaj · Jun 22, 2015

I did this when I was in grad school the first time around to get my MPH. I do NOT recommend this method AT ALL ... you will be better off in the long run with the "high interest" loans. You get hit with a MAJOR penalty when you withdraw and then again when you file your taxes.
ETA: you basically end up with 50% value once it's all said and done with fees, taxes and penalties

I did the same thing to finance the last semester of my BSN program to avoid more loans. Not worth it in the least, specifically because you end up paying more in taxes and penalty then you anticipate and lose close to half of the original balance.

AllIcanbe · Jun 22, 2015

Thank you for the advice! Now i am having second thoughts given you only end up with about half the initial withdrawn amount.. I am planning ahead and I know loans ( mortgage/ car payments/ daycare)may be inevitable but I will like to graduate with as little debt as I could get away it.... Pls share life hacks that saved you money/ helped with loans while in school â˜ºï¸

NinerNurse · Jun 22, 2015

Don't do it.. For every thousand you take out now, you'd lose approximately $20000 for retirement (given about 30 years of compounding earnings). Put as much as possible into retirement, take out the loans you need, and pay off those loans ASAP.. You'll be thankful you did down the road

llg, PhD, RN · Jun 22, 2015

As I have heard some financial advisers say.

There are scholarships, loans, and pay-back options to help pay for your education ... but there are no such things like that for retirement. If you use your retirement money for other things, there will be nothing there for you live on when you retire. Don't count on someone to rescue you with a scholarship or loan when you are old and poor.

If that means slowing down your education to earn money while you go to school ... or you can't afford the most expensive school ... so be it.

I delayed my grad school a bit and lived very cheaply to save up some money for grad school ... and was able to piece together my savings, scholarships, loans, and part time employment to get through 7 years of full time graduate school for my MSN and PhD. (loans paid off in about 5 years) I didn't touch my retirement savings -- and you shouldn't either.

missmollie, ADN, BSN, RN · Jun 23, 2015

I took mine out to pay for the last 2 semesters of school, as I was not eligible for student loans (It was worth 7000, and was from my high school job from 14 years ago). I may have lost out on 50% of the value, but now I have a job as an RN. If there is a way around it, don't do it. If it's your only option, then do what you have to do.

BeachsideRN, ASN · Jun 23, 2015

Thank you for the advice! Now i am having second thoughts given you only end up with about half the initial withdrawn amount.. I am planning ahead and I know loans ( mortgage/ car payments/ daycare)may be inevitable but I will like to graduate with as little debt as I could get away it.... Pls share life hacks that saved you money/ helped with loans while in school â˜ºï¸

Apply for as many scholarships/grants possible. Cut costs where you can. If you have a SO that will still be earning, rework your budget now so you can get used to the pay cut. And sometimes you just have to eat humble pie and accept any help you are offered. You do what you have to do. If you have to take out loans you can pay interest while in school to help with the cost. It all comes down to budget budget budget and cutting anything extra. Buying clothes from goodwill. Cutting cable. Cutting the food budget (that seems to always be a big one that is pretty easy to chop down). Limiting entertainment to free things. Is it possible to pay off the car before school? Pay off anything now that you can. If nothing else it's one less bill to stress over.

kbrn2002, ADN, RN · Jun 23, 2015

I wouldn't suggest withdrawing from your 401k, the tax penalties are severe. But, if a 401k loan is available to you that may be a decent option. Basically you are borrowing money from yourself at a lower interest rate than you can probably get from any student loans. I may be wrong but I think this only works if you are employed by the the same place that you invest in your 401k with and repayment is through payroll deduction. I would suggest you check with the 401k investment firm to see if this is even an option for you.

Alor14582 · Jun 23, 2015

I wouldn't suggest withdrawing from your 401k, the tax penalties are severe. But, if a 401k loan is available to you that may be a decent option. Basically you are borrowing money from yourself at a lower interest rate than you can probably get from any student loans. I may be wrong but I think this only works if you are employed by the the same place that you invest in your 401k with and repayment is through payroll deduction. I would suggest you check with the 401k investment firm to see if this is even an option for you.

Good idea but even with the loan from your 401 you are losing money because all your money isn't out in the market and the interest you pay yourself isn't enough to make up for the money that you are losing. I think there is also a penalty and taxes. Look into it and let us know if I am wrong.