Can I use my IRA to pay for college?

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 Q. I’ve heard I can use my IRA to fund college tuition payments for my kids. I’m not sure how the rules work, or if I should. What should I worry about?

A. There’s plenty to worry about.

First, let’s make sure you understand the rules of using your IRA to fund a child’s education.

Normally, a distribution from an IRA prior to age 59½ would cause you to pay a penalty of 10 percent for an early distribution, said Michael Green, a certified financial planner with Wechter Feldman Wealth Management in Parsippany.

But there is a way to avoid this.

“The IRS allows you to take an early distribution from your traditional IRA, SEP IRA, Roth IRA, or SIMPLE IRA prior to age 59½ without incurring the additional tax if the distribution is to pay qualified higher education expenses for yourself, your spouse, or your children,” Green said. “Qualified education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.”

Now, even if you can do this, should you?

The answer isn’t a simple one.

“Without knowing your complete situation, I will assume your IRA was initially started to sustain you through your retirement years,” Greens said. “Removing funds from your IRA to pay for your child’s education will not only lower the balance of assets you can use in retirement, but it will also eliminate the future tax-deferred or tax-free growth you would have earned on those dollars.”

And because there are annual limits on the amount you are permitted to contribute an IRA account, it will likely be impossible to make up in contributions for the amount you withdraw now.

Also, Green said, taking funds from your IRA account may affect your child’s ability to receive the maximum amount of financial aid for which they are entitled.

“Your biggest worry should be that by using your retirement savings to pay for your child’s education, you may outlive your money or not be able to retire at all,” he said. “You should consider that your child can borrow for education, but you cannot borrow for retirement.”

Learn more about your options to pay for college if you haven’t saved enough.

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This story was first posted in November 2014. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.