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If you decide to use your employer-sponsored 401(k) for educational purposes, be aware of the rules and regulations that govern these early withdrawals, which are not penalty-free:
There is a penalty exception (the 10%) for taking an IRA distribution for tuition, but the tax is still due.
This exception is NOT available for 401k distributions (withdrawals). You withdrawal will be taxed and subject to the 10% early distribution penalty.
Q. What reason does one select when a 401k withdrawal was taken to pay for college tuition?
A. Early Distribution. The plan administrator should have already put code 1 in box 7 of your 1099-R. There is nothing more for you to do.
Thank you.
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