By Barbara O’Neill
Can a service member in his 30s use funds in a traditional IRA to pay for college?
Like all IRA owners, service members who withdraw funds from a traditional IRA before age 59 ½ are subject to the 10% early withdrawal penalty with a few exceptions. One of these exceptions is to pay for qualified higher education expenses. Funds withdrawn will be subject to the early withdrawal penalty, however, if they are in excess of the actual amount of expenses.
When determining the amount of money needed to withdraw, service members should take into account any distributions from 529 plans, scholarships, grants, and other tax-free payments, such as gifts or inheritances they have received during the year. Qualified higher education expenses for the IRA exemption include tuition, fees, books, supplies, and equipment required for enrollment as well as room and board as long as the student is attending school at least half-time.
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This post was published on the Military Families Learning Network Blog on May 27, 2013.