Contribute $15k to IRA or save the cash for future college?

**Benderz** · 01-13-2018, 12:42 PM

I suggest you and your son work together to eliminate loans from the plan. Maybe go to a community college for a year first, cheaper school, live at home, etc... Don't have the full picture but if your not systematically saving for retirement you should examine everything in your life. Such as car loans, debt, life style, career and get things back on track. Use this as a turning point for yourself and start you son off into adulthood with a financial plan that avoids the rat wheel of debt.

**Jluke** · 01-13-2018, 01:26 PM

15k - 5500 (or 6500 if you turn 50) in 2018.

Leaves you with $9500 (or 8500) for college expenses. Can you get back to 15k by the 3rd year of school?

Have you accounted for tuition increases?

You can get a loan for college. You really can�t get a loan for retirement AND you lose the chance to contribute if you skip a year.

Good job with 250k and planning ahead.

**Gailete** · 01-13-2018, 09:22 PM

Am I understanding this right? You won't need to kick in anymore money until he starts his third year of college, several years from now?

Do you have a Roth IRA? If so, or you could open one, you could dump in Part of that $15K each year. Currently you can still contribute for 2017, and then turn around and contribute for 2018. I don't know what your limit might be for investing in it, but as you are 50 you should also get the make up contribution amount as well. You decide what you want to invest in and any interest, dividends that it throws off you get to keep, and you can take that same $15000 out/$7500/semester back out of the Roth IRA as long as you don't take out any interest paid on the account without penalty. This is a case of having your cake and eating it too. You get to keep the interest in a retirement fund and you can keep using it to invest in as well.

Anyhow that should work if you are allowed to make those contributions. I have over $6K now in my Roth IRA and I know that I am at an age I can tap even the interest, but nice to have a way that you can save for something and get a retirement advantage as well. Even now if I want to tap it I can with no tax due as long as I don't touch the earnings.

**Thrif-t** · 01-14-2018, 08:54 AM

So it sounds like your son will be taking out all the subsidized and unsubsidized loans to pay his part of school, he'll get a total of 27k for all 4 years. Does he get any merit money or any other scholarships that will bring his portion owed down, will he be working? If so, I'd take out as much of the 27k as you need; for your portion of the last year, and just have an agreement going in as to the loan amount that would be your responsibility.

The gov't loans are going to be the cheapest loan source you can do. The interest on the subsidized doesn't start till 6 mos after graduation with the gov't paying while in school. The unsubsidized interest does accrue from day one but you can easily pay that monthly so the loan amount doesn't balloon. Example, 1st year of my oldest, we took 2k unsubsidized loan, interest was like $11 mo that she paid.

Also look into the AOTC https://www.irs.gov/credits-deductions/individuals/aotc, that's $2500 credit back on your taxes for qualified college expenses. But I will tell you if you pay all tuition and room and board out of your 529 you won't qualify for it, but if you take out the govt loans or pay cash you will. We did a combination.

What we did is figure things out so we could take the loans, get the AOTC credit, use some of the 529 and then now my DD last year we're just paying all from the 529 and some cash out of pocket.

I've been saving the majority of the tax credits that I get back every year with the intention to pay down her student loans. She'll have around 15k and I should have around 7,500 from tax credits to apply to that balance so she only has around 7k to pay.

This might be a little complicated with you since you have an ex dh and I'm not at all sure how things would work on your taxes. But thought I'd share what works for us as we did the whole, she pay a year, we pay a year, she got a years worth of college credits in high school, and then loans for a year.

Good Luck

P.S. now that I go back and re-read this, I guess it is all contingent if you even qualify for any Government loans, maybe your income is too high? In that case if it were me, I'd put my 15k in a Roth IRA and save it to pay my part of his school. And in the mean time, sock away as much extra money as I could these next years and hope I didn't need to take that money out

.

Of course you can only put $6500/year in your Roth so keep that in mind.

**msomnipotent** · 01-14-2018, 09:31 AM

You can put the money in your IRA and still use it for college expenses without penalty. I'm not sure why this doesn't seem to be as well known as other means for paying for college, but it is an option.

Here is a link from US News that explains it pretty well. https://www.usnews.com/education/bes...ay-for-tuition

Just like most things dealing with the IRS, there are a lot of if, whys, and buts. Using a Roth to pay means that the withdrawals won't be counted as income because you already paid taxes on the contributions, but you can't use it if the money hasn't been in the Roth less than 5 years. There is no time limit for a traditional IRA that I know of, but it counts as income come tax time and when figuring out aid for next year. It won't matter for aid if you are using it to pay for the last year of college. It might push you into a higher tax bracket when you pay taxes, though. It depends on your own situation.

Contribute $15k to IRA or save the cash for future college?