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jargo

457 For College?!?

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My wife has a 457.

 

My daughter will be going to college.

 

My wife will be 59.5 when my daughter enters college. (We got started late!)

 

My wife will not be retireing at age 59.5.

 

Question 1: can she withdraw 457 funds even though she is not retired, but is 59.5?

 

Question 2: Assuming yes to #1, is it better to save tax-free dollars in a 459 than after tax dollars in a 529 college savings plan for this purpose? (Note: We also have 403bs adequate for retirement. I am not cannibalizing that.)

 

Thanks for your insights!

 

 

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Hey Jargo,

 

Unfortunately you may not begin to make penalty-free withdrawals while working until the calendar year in which you reach age 70-1/2.

 

And she wouldn't be allowed to utilize 457 money from a hardship withdrawal:

457(b) plans may, but are not required to, permit distributions to participants or beneficiaries who are faced with unforeseeable emergencies.

 

The plan must define "unforeseeable emergency" as a severe financial hardship resulting from:

1) an illness or accident of the individual, the individual's spouse, or the individual's dependent,

2) loss of the individual's property due to a casualty, or

Similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the individual.

 

Examples of unforeseeable emergencies might include:

• imminent foreclosure of, or eviction from, the individual's primary residence,

• the need to pay for medical expenses or medicines, or

• funeral expenses for a spouse or dependent.

 

Please note that home purchases and tuition payments are not considered unforeseeable emergencies.

 

Have you looked into a 529 plan?

 

Dan Otter

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Hey Jargo,

 

Unfortunately you may not begin to make penalty-free withdrawals while working until the calendar year in which you reach age 70-1/2.

 

 

 

Thanks, this is helpful (although disappointing). It's the "while working" part I didn't get. Somehow I thought she could start taking it out once she was 59.5. That was my confusion. Hey, maybe my daughter could delay college for a while?

 

Yes, we have a 529, and my plan all along has been to use that for my older daughter. But I was intriqued by the possibility of using pre-tax rather than post tax dollars for my younger daughter.

 

Again, thanks for your help.

 

Jargo

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