You didn’t offend! You’ve been very helpful. 
OP:
Welcome to the other side!
I’m guessing that the OP meant that her other kids contributed with earnings and other ways, but no loans.
How does borrowing against a 401k work? I realize that you’re “paying yourself back”, but what else happens?
You are paying yourself back interest too on a loan from 401k. The danger is if you change jobs, it becomes due within like 30 days. What you want to do is reduce your 401k to the company match level and increase your cash flowing of current education and other expenses. Get on a strict budget will help assigning the dollars and you will reduce your obsolete expenses.
Depending on your age, if you are a homeowner (when will you pay off your home - and do you plan to later downsize) - there are a number of things to see if financially you are making good moves.
Congrats on the better paying job.
Try to live lean and cash flow as much as you can. In 3 years you can then focus more on building up retirement.
You will pay higher taxes if you put in to Roth IRA versus 401k. Maybe after last is out of college, you can convert some of you money into Roth (you have to pay the taxes when you convert it, but the growth and any amount taken out after you are 59.5 is tax free).
If dental is affordable benefit take it - you need to get your teeth cleaned etc and decent dental insurance will cover most. My H just had a new crown - it paid 50% of allowable after $50 deductible, but the savings probably paid our share of the dental benefit for several years. We have a vision plan with 3 with glasses (and I do need to have eye check ups at least every 2 years for good health) and the vision plan is worth it for our family.
If you have 401k from a former employer, you can roll it into your own IRA, and later move it to a Roth IRA.
You could roll it into your current employer 401k, but that would limit you moving it later.
Have a good sit down with your HR person and also seek out other advice. You can roll your past 401k into an IRA with a company like Fidelity and have it in indexed stock mutual fund to keep fund costs low and have decent returns.
mom2, you just fill out the loan documents required by your employer (or whoever manages the plans). Usually, you can’t borrow more than 50% of your vested pot, and not more than $50k. They will make a 4 year repayment plan, and this will include interest. You pay back into the account the amount you borrowed plus the interest. The payments are deducted from your paycheck. While the money is ‘out’ of your 401k, the corpus is not earning interest on that loan, which is the true loss to the borrower, the loss of investment income your money should be earning.
AOTC cut-off for a single parent starts at 80K AGI. Maybe I should reverse my advice to put money into Roth if you can get below 80K after 401K deductions. Also look at FSA if you expect unreimbursed medical expenses. This is up to $2,550 that just disappear from AGI and Finaid analysis.
We do not know what is the story with the second parent but if you can cooperate and he is under 80K AGI you can give him child deduction and AOTC credit (and make him contribute these money to tuition). You can still file as HOH.
Ok, this is all starting to make sense. I might be able to get under $80K after 401k deductions this year. I set up an FSA but probably should have chosen a larger deduction. Other parent is not in the picture but that’s another great idea that might help lots of people.
@2collegewego I hope it all works out for you! You’ve done an amazing job raising your brood all by yourself. I’m happy that you have this big salary increase even though in the short-term it may seem to be “one step forward and two steps backward.” In the long run, since you’re so young, that much bigger income and your ability to save more once your youngest is out of college, you’ll be much better off in your senior years.
{{{ hugs }}}
Yes that is a great accomplishment!
@CCDD14 FSA contributions don’t disappear; they are added back to AGI on the FAFSA. I think the only time they would disappear would be if they were used to lower AGI below 50K.
There is no question about FSA contributions on FAFSA. You are probably mixing up FSA and retirement contributions. There is however a question about FSA on CSS Profile.
I realize the retirement contributions will be added back on the Fafsa but they disappear for AOTC purposes, right? I’m less concerned with the FSA. I set it lower than I should have.
Thanks, I was thinking of the Profile. FSAs don’t roll over, so there need to be enough expenses to offset the contribution.
FSA contributions are not added back on FAFSA because they are not reported anywhere on FAFSA.
So they disappear for both purposes.
We can ask @kelsmom to verify this statement.
@Mehitabelle Actually, I was told by human resources the law on that has changed and FSAs can now roll over, but only if the company has agreed to that. My company hasn’t so I don’t know how that works.
Oops, we are all posting at once
yes, (pre-tax) retirement contributions will be added back on the Fafsa but they will decrease AGI for AOTC purposes
So the correct strategy may be to put enough money into 401K to bring AGI right under 80K and then direct the leftover into Roth IRA to use for last year’s tuition. This is the approach to minimize EFC. If the school does not meet full need then hiding savings in Roth may not buy you anything.
The main purpose of saving in a Roth in addition to 401k, as I understood it, was easier access to the money (no 401k loan neeeded, no interest to pay), and also in contrast to regular savings it is not figured into FA calculation.
The disadvantage of withdrawing from a Roth IRA for educational expenses is that the witdrawn money might be considered as income. But if you’re full pay anyway and not qualified for any FA then it doesn’t matter.
For my company, the HSA can be roll over but not the FSA.