Using my IRA and I'm 26?

[Guest doctorhathaway]

In search of a new career path, I would like to use my 401K for a Master's degree.

To which of the 11 types of IRA's do I want to rollover my 401K? Does it matter since I won't be penalized the 10% because it is going towards higher education? Also, how do I get to this money? Does it just go to a bank and I just withdraw like any other checking account?

Thanks in advance for any advice you guys have!

[MGB]

Don't!

Borrow through a student loan instead.

The effects on your future financial situation (due to the tax effect of each) is substantial. Not even a close decision.

[Guest doctorhathaway]

OK. I'll look into that. Also, I'm about chin deep in student loans from the undergrad days. What's another few thousand?

What will happen to the money in my 401K from my former employer? What's a good way to hang on to it while I'm a full-time student? IRA's?

[MGB]

That depends on your sophistication of investing. If you leave it in the employer plan (assuming it is not in employer stock), you probably would have access to good investments (e.g., mutual funds) that are diversified and are managed by professional money managers. However, if you roll into an IRA, you will need to become the professional and choose your own investments (which could include good mutual funds, but you still have to pick them). You could also run into fees for maintaining the IRA that you are not being hit with in the 401(k).

Also, if you roll into an IRA, it is all that much easier to cash it out and spend on something that you shouldn't (along with paying regular taxes plus 10%).

Also note that student loan interest (once you start paying it) will be tax deductible. However, with work after your masters, perhaps you will not be eligible (I think the deduction phases out after $50,000 adjusted gross income, but there was a bill introduced this last year to remove that limit so anything is possible by the time you are out).