How to Finance Home Schooling Your Children
Ryan Ermey: If the pandemic has you weighing the costs and benefits of homeschooling your children you're not alone. It's a complicated and personal decision though. And Kiplinger.com online editor Andrea Browne Taylor is here to help you weigh the pros and cons in our main segment.
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Ryan Ermey: On today's show, Sandy and I discuss what to do with a 401(k) if you're leaving your job, and we also get into a new batch of our wackiest PR pitches. That's all ahead on this episode of Your Money's Worth. Stick around.
Ryan Ermey: Welcome to Your Money's Worth. I'm Kiplinger's associate editor Ryan Ermey joined as always by senior editor Sandy Block. Sandy, how are you?
Sandy Block: Good, Ryan.
Ryan Ermey: And today, we are going to be -- in our main segment, anyway -- talking to Andrea Browne Taylor, because it's become obviously much more in the front of people's minds, the possibility of homeschooling their children, and so that will be the topic of our main segment today.
Ryan Ermey: And something that dovetails into that is that lots of people are staying at home with their kids. If their kids are home doing school remotely, one of the parents has got to stay home. So, and a hat tip here to Daniel Milan of Cornerstone Financial Services, and Nick Fecorai, who sent the pitch. We do have to give credit where credit is due when we receive good pitches. But the pitch here is all about what are you supposed to do with your 401(k) plan if you leave work to stay home with the kids?
Sandy Block: Right? And this comes up, this isn't a unique situation. This comes up often when parents decide they need to step out of the workforce. Often it's the woman, but not always, and parents want to step out of the workforce for a while. Maybe they're leaving their jobs for a few years until their kids are older.
Sandy Block: And, obviously, this has accelerated now, because for some people it's not a choice, the kids are home and so maybe they don't have a job that allows them to work from home so they have to quit. And the question is, what do you do with your 401(k) when that happens?
Sandy Block: And as I said, we got some great tips from the folks at Cornerstone, but the first thing I will say is avoid at all possibility -- unless you're absolutely broke -- cashing it out, which a lot of people without very large balances or young people are inclined to do.
Sandy Block: If you cash out your 401(k), you will pay taxes on it, plus a 10% early withdrawal penalty if you're under 59 1/2, and if you have little kids, you probably are. And that will take a quarter to 30% of your 401(k), not to mention that you will permanently reduce the amount that you'll save for retirement. So really, really try very hard not to cash it out.
Sandy Block: Another option that makes a lot more sense is to roll it into a traditional IRA. Financial services firms will line up to help you do this. They love to do this, do a rollover. They'll do all the work for you. One of the nice things about a rollover is that it will give you maybe more investment options than you had in your company 401(k) plan.
Ryan Ermey: Right. You don't have to choose from the menu anymore.
