Roth IRA and Qualified Distribution Question

It’s late night here and I have not asked ATP or Wells Fargo yet but does anybody happen to know if the loan WF provides meets the higher education requirement to avoid the 10% early withdrawal penalty on a roth IRA?

Kyle,

Best to check with ATP Admin in the morning but I don’t believe ATP is listed as a Type IV school by the IRS so I’m thinking not? Def not 100% sure so please check.

Adam

1 Like

I’m pretty sure you can but the amount you plan to use, can’t exceed the amount you have contributed if that makes sense. Once you want to use money that is earned or gained before you reach 59.5 years, can’t be used to pay off student loans but it can be used to pay for tuition, expenses etc related to school as long as it is on their qualifying list, without incurring penalty.

I’ve just started looking at the loan guidelines for this, I didn’t even realize this was through sallie mae at first . Call em up…they should be able to answer that question for you.

I don’t know how old you are but the drawback to that is that you want to keep as much money in your IRA’s as possible. Taking it out to pay this off early could have an impact later on. Obviously I don’t know your financial situation but the more you have in your retirement accounts that can compound, the better. Even if the interest rate on this loan is higher than what you earn on your accounts and the loan amount is somewhat substantial, you are talking about pulling out $100k from ira that is in a compound stage. I would have to look at hard numbers, your age, income, yearly contributions, etc but I probably wouldn’t do it unless you are in a very good situation.

Even if you took the payment you would make to WF for the ATP loan and put it directly back into
your IRA, you would lose money, more than likely, I mean compounding and $100K compounding…it’s a no brainer… but again that would take a lot of “busy work” so to speak and much more information would be needed and it isn’t free. Cheers :slight_smile:
Damian

I’d be interested to see what they tell you, but I suspect Adam may be right (he usually is, isn’t he? :wink:)

I actually tried to defer my regular student loans while I am attending ATP, and they told me that I didn’t qualify for a deferment because, as Adam referred to, ATP is not a Title IV school that qualifies for the Federal Student Loan program.

BTW, if anyone is bored and wants some reading, you can see the full list of Title IV schools here:
https://ifap.ed.gov/fedschcodelist/attachments/1920FedSchoolCodeList.xlsx