Los Angeles, CA (PRWEB) March 17, 2014
Many parents are faced into a tight spot particularly on financial matters when paying for their child’s college. Roth Solo 401k account holders dealing with this financial problem must be pleased to know that there are options available for them using their retirement money to fund or to support qualified higher education expenses for their child.
One of the options for parents who own a Roth Solo 401 k is to use the loan feature of the said retirement plan. The minimum amount to make a loan must not go below $1,000 while the maximum loan amount that a plan holder could possibly borrow is half the amount of their account value but not to exceed $50,000. With this limit, account holder must be aware that they cannot borrow large sums of cash from their retirement savings. Borrowing from the account doesn’t require a particular purpose to get approved. The amount borrowed can be used for any purpose and that includes education expenses.
In the case of early withdrawal, even if Roth Solo 401k contributions are made after tax, early withdrawals are considered as non-qualified distribution and therefore would be subjected to a 10 percent tax added on the taxable part which is normally the earnings on contribution to 401k. But there are exemptions to this rule. IRS stipulated that payments made for the purpose of qualified higher education expenses are not covered by the additional 10 percent tax. Qualified education expenses are the school fees (tuition and other related expenses) for eligible students which must be paid by the parents.
Take note that qualified education expenses do not include room and boarding, insurance fees, medical and student health fees, transportation expenses, and personal, living or family expenses. Instead of applying for student loans which according to Josh Freedman’s article from Forbes.com is “one of the worst possible ways to pay for college” taking advantage of Solo 401k funds could be a better option.
Sense Financial is California's leading provider of retirement accounts with "Checkbook Control": the Solo 401k and the Checkbook IRA. Over the years, they have assisted hundreds of clients obtain checkbook control over their retirement accounts while providing them with the ability to invest in virtually any investment class, including real estate, private lending, mortgage notes and much more without the need for custodian approval.
To learn more information about Solo 401(k) for self-employed real estate agents, please visit http://www.sensefinancial.com.