Retirement question?
Scenario: A person has been at a job for about 2.5 years and putting money into a 401k retirement plan. They plan on going back to school in approximately 8 months and leaving their job (permitting acceptance). They will be in school for 4 years and not working. What would be the best thing to do with the retirement? Can it just sit there for 4 years? Also, if accepted to school, can you stop contributing to retirement immediately so that money can be saved for moving expenses, etc? More than likely, the money will have to be withdrawn for additional costs of moving and getting started again in a new city. Will they let you withdraw before leaving a job? If not, in this case, could you stop putting money into retirement once accepted to school, and then withdraw later? Very confused on how this all works. Any input is appreciated.
Public Comments
- If you leave your job, you can roll the 401K money into an IRA. While still at your job, you may discontinue your contributions to the 401K. One view is that It's best to let the money just sit in the retirement account (you need to eat when you are 65). A second view is that you need to get through school *now.* If you withdraw the money from the IRA, it's added to income, so try and take it out in a year where you have little income. If you withdraw the money before you are 59.5 you may owe a 10% penalty on taking it out. If you are paying tuition with that money, you may be able to get out of the penalty. And, you really do want some income while you are in school since you can use your education expenses as a credit to reduce the tax bill.
- You need to get the terms and conditions of your 401K. The plan administrators/employer are required to give this info to you.
