I am over 59.5 years. Can I withdraw 401k rollover dollars tax free to pay my daughter's college tuition? If yes what IRS form(s) do I use?


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You can take a distribution from your 401(k) or IRA to pay your daughter's college tuition, but it's not tax free. Remember, your 401(k) is essentially a deferred compensation plan, so you pay income tax on it just like on wages. You will receive a 1099 form in January that reports this as income to you, and you report it on your 1040 tax form in April. Also be aware that they will also withhold 20% income tax from your distribution.

You might be better off taking a loan against the plan. The interest you pay goes back into your account so you are paying yourself interest.

You can withdraw from your IRA (but NOT the 401K) for higher education costs for your daughter and be exempt from the 10% Early withdrawal Penalty, but you WILL have to pay state and federal income taxes on the withdrawal.

For this reason, I agree with Scott that the loan option is probably the better deal for you. You can borrow from your 401K, but NOT from the IRA.

ATE: Doesn't paying tuition for a child qualify as a hardship withdrawal for a 401(k) plan, so if her plan allows hardship wthdrawals she could do this. I woudn't recommend it, but in response to the OP's question I believe it is possible.

Hardship generally applies to items that must be withdrawn in order to survive (pay for food, housing, utilites, etc.).

Paying for college does not qualify.

Of course, all anyone would have to do is to roll the money from the 401K into an IRA, what the requisite amount of time (say, ten seconds), then withdraw it from the IRA under the higher education cost exemption.

If you give any problem enough thought, there ARE ways around the restrictions.

ATE - not to pick a nit, but the IRS defines the following as hardships with respect to allowable 401(k) hardship withdrawals:

1. Un-reimbursed medical expenses for you, your spouse, or dependents.
2. Purchase of an employee's principal residence.
3. Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
4. Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
5. For funeral expenses and repair of a primary residence.

That's what the IRS allows. The rules fro individual plans may differ, and I suppose it's possible that there may be a plan out there that doesn't allow withdrawals for paying a child's tuition. But as far as the IRS is concerned it's OK.

I grant you that the IRS allows it, but, it has been my experience that MOST 401K plans do not.