Can I start a 401k at target to help pay for college?
Ty C asked:
Im 17 and a senior in high school. im not sure how the 401k plan works, but i would love to take advantage of it for college if possible.
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Im 17 and a senior in high school. im not sure how the 401k plan works, but i would love to take advantage of it for college if possible.
February 15th, 2010 at 1:48 pm
No - a 401(k) is for retirement..if you withdraw prior to age 59 1/2, you pay penalties. What you want is to open a 529 plan. However, if you pay no taxes, it will be of very little use, since the main advantage of these plans is the tax deductions. You would be just as well off making investments outside of a 529 plan. Steve D
February 18th, 2010 at 4:52 pm
Actually this is a LOUSY idea for you.
Your income is probably less than $5700, so you won’t taxes now anyway. The major purpose of the 401K is to reduce your income by tax-deferring the money in the 401K.
After you quit working at Target, you’d have to roll the money to an IRA before taking a distribution for school expenses (otherwise you owe a 10% penalty).
Even if you use the money for school, you still OWE the income tax. Worse as a dependent, you would pay the income tax as your PARENT’S tax rate. That means money you saved at 0-10% when you put the money into the 401K will cost you 15-25% to take it out. (”Kiddie tax now goes until age 23.)
Bad idea. v b
February 19th, 2010 at 6:19 am
No you cant recieve money until your 65. Billy P