Like most people, my financial situation has changed quite a bit from before I had kids. When my kids were born I was strapped financially and when I started looking into saving for their college I found the advice about saving for retirement first and the flexibility that the roth IRA offered (to also pay for college). So long story short, I chose to not open a 529 and instead fund Roth IRAs for me and my wife.
Over the years, my financial situation has improved. I began to hit many milestones, like maxing my 401k every year, maxing HSA family (and no withdrawals), becoming debt free except for 2.65% mortgage, continued funding Roth (eventually needing the backdoor Roth as my salary improved), and even maxing mega backdoor Roth. I feel great about the progress I’ve made, but it was always a struggle to save and I never felt like I had any more I could save.
So as a result I never opened a 529.
Time has flown by and it’s time to start paying for college and I’m faced with the decision of where to pull the funds from. I’d love some advice from like-minded folks here.
Withdraw contributions only from Roth
Pros: Tax Free/Penalty Free, Treat this as if I had opened a 529 instead of a Roth
Cons: Losing future gains in Roth
Withdraw from Inherited IRA (currently I’m allowed to stretch the RMDs over my lifetime)
Pros: This is money I have to withdraw eventually anyway
Cons: all taxable
Withdraw from HSA (Reimburse for prior years medical expenses)
Pros: Tax Free/Penalty Free
Cons: Losing future gains in HSA
Withdraw from Wife’s traditional IRA
Cons: All taxable
Pros: If I removed all of it, would allow for future backdoor Roth contributions for her
Student Loans
Cons: Interest/Debt
Pros: "Everybody does it"
Reduce 401k contributions (still enough for full company match)
Pros: This might allow me to pay the tuition without any withdrawals/loans, 401k balance is large so gains already outpace the contributions anyway
Cons: psychological issue of taking my foot off the gas on retirement, getting out of the habit of maxing 401k might make it tough to go back
Sell some stock in taxable account
Pros: long term capital gains only
Cons: Losing future gains/might need this money for other expenses
Other suggestions?
Over the years, my financial situation has improved. I began to hit many milestones, like maxing my 401k every year, maxing HSA family (and no withdrawals), becoming debt free except for 2.65% mortgage, continued funding Roth (eventually needing the backdoor Roth as my salary improved), and even maxing mega backdoor Roth. I feel great about the progress I’ve made, but it was always a struggle to save and I never felt like I had any more I could save.
So as a result I never opened a 529.
Time has flown by and it’s time to start paying for college and I’m faced with the decision of where to pull the funds from. I’d love some advice from like-minded folks here.
Withdraw contributions only from Roth
Pros: Tax Free/Penalty Free, Treat this as if I had opened a 529 instead of a Roth
Cons: Losing future gains in Roth
Withdraw from Inherited IRA (currently I’m allowed to stretch the RMDs over my lifetime)
Pros: This is money I have to withdraw eventually anyway
Cons: all taxable
Withdraw from HSA (Reimburse for prior years medical expenses)
Pros: Tax Free/Penalty Free
Cons: Losing future gains in HSA
Withdraw from Wife’s traditional IRA
Cons: All taxable
Pros: If I removed all of it, would allow for future backdoor Roth contributions for her
Student Loans
Cons: Interest/Debt
Pros: "Everybody does it"
Reduce 401k contributions (still enough for full company match)
Pros: This might allow me to pay the tuition without any withdrawals/loans, 401k balance is large so gains already outpace the contributions anyway
Cons: psychological issue of taking my foot off the gas on retirement, getting out of the habit of maxing 401k might make it tough to go back
Sell some stock in taxable account
Pros: long term capital gains only
Cons: Losing future gains/might need this money for other expenses
Other suggestions?
Statistics: Posted by Citifan — Fri May 10, 2024 10:29 pm — Replies 7 — Views 453