There are different ways that you can do with Solo Roth 401k when financing your daughter’s tuition fee
We all know how expensive going to college is. Aside from the high tuition fee, you also need to set aside funds for miscellaneous fees not to mention room and board, medical expenses, transportation and other related expenses that go with as you send your child to college. If you are a Solo Roth 401k account holder, worrying about this could be lessened as there are options you can do to help you give your child the education she needs.
Where to get the money to pay for your daughter’s college could be provided by your Roth Solo 401k. If you are 59 ½ years old, and your Solo Roth 401k account have completed at least 5 years, you are in a great position to make withdrawals or receive qualified distributions without worrying about tax deductions or penalties. If you don’t meet the qualifications mentioned, the next available option for you is to make early withdrawal from your Solo 401k retirement savings.
Qualified education expenses is penalty-free for early withdrawal
Making early withdrawal from your plan means you are receiving a nonqualified distribution which is subject to a 10% tax on the earnings from your contribution. However, since the fund will be used for higher education expenses, the additional 10% tax or the penalty will be waived. This is because qualified education expenses is one of the exemptions that IRS mandated to qualify for a tax free nonqualified distribution.
If none of the options above works for you, there is another option you can do with your account. This is to use the loan feature, meaning you can borrow the money from your retirement funds. You can receive a loan equivalent to half of your account money but not exceeding $50,000. There are no required reasons to make this loan possible because the money you are eligible to borrow from your Roth Solo 401 k can be used for any purpose.