How I Saved for Law School: $65k in 3 Years

saved for law school
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10 Responses

  1. ELee says:

    Did you have to pay taxes when you rolled the 401k over into the IRA? Were there any other consequences to doing that rollover? I’ll be starting a new job with a 401k soon and I’m trying to figure out how I can best use it (if at all) to save for law school. I already plan to early withdraw most of my IRA funds for law school (I’m in my mid-20’s).

    Also, while it’s generally recommended to not make early withdrawals from retirement, I’m of the opinion that if you’re relatively young and using the funds for a degree that will substantially increase your earning capacity, it’s worth it to graduate with little to no debt and you’ll be able to quickly replenish the funds you withdrew with your new fancy high salary!

    • Lisa says:

      Yes, I had to pay taxes when I rolled over my 401k into a Roth IRA (but wouldn’t if I had rolled it into a traditional IRA). A 401k is pre-tax money and Roth is post-tax. But I’d have to pay taxes on the 401k money at some point and because I was going to go to school, my income bracket was very low. Thus, I figured it was an excellent time to pay my taxes and get tax-free gains on my money in a Roth or to use that money for law school.

      The negatives are that I attended law school from 2009-2012, which were banner years for the stock market. And when I cashed out my 401k, it certainly wasn’t at its peak. Of course, with law school loan interest at 6.8% or more, and without having a crystal ball for the stock market, I still would have made the same choice. Even as the stock market was zooming in 2012, I chose to pay off my loans aggressively because the interest was so high.

      I totally agree that using your 401k to pay for higher education can be the right choice, even if it’s against the popular wisdom. Good luck on your journey and new job!

  2. Wow! It’s certainly not what’s recommended by mainstream personal finance (tapping retirement accounts early), but the risk/reward worked! I was expecting something much more back alley 🙂

    • Lisa says:

      It was a little click-baity but I couldn’t figure out a better title. Maybe – here’s what I did but what you should NOT do!

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