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, you also need to set aside funds for other expenses such as room and board, medical expenses, transportation and other related expenses. If you are a Solo Roth 401k account holder, your worries could be lessened as there are options to help you give your child the education she needs.
Your Roth Solo 401k can provide the financing to pay for your daughter’s college. If you are 59 ½ years old, and your Solo Roth 401k account have been set up for at least 5 years, you are able to make withdrawals or receive qualified distributions without worrying about taxes 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 non-qualified 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 non-qualified 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’s total value but not exceeding $50,000. There are no explanation needed to take out the loan because the money you borrow from your Roth Solo 401 k can be used for any purpose.