So for people in my tax bracket who are 100% sure they're going back to school full-time in the near future, isn't this a no brainer? I know you may think it's not smart from a retirement planning standpoint, but I'm not deciding between a long-term IRA invesment vs. withdrawing money early for school. It's more of a decision between keeping this small amount ($3,700) in my savings/trading account for the next three years vs. avoiding a higher tax rate now by investing in an IRA until I need the cash for school. Basically, I don't plan on putting away large amounts of cash for retirement until after I go to grad/law school. For now, the 3% that my company matches is fine.
Yeah, that sounds right. Ideally you keep your savings in there. But if you have to use it, this is a good way to avoid taxes now and pay them when you are in a lower tax bracket.
First off, if your company is contributing, that would be a 401k, and not an IRA. I would also like to mention that this money should never be touched until retirement. Believe it or not, due to compounding, a 20 year old who invests $1,000/year for years 20-25 and then never contributes again will still make more than a 30 year old that contributes $1,000/year for years 30-65. Just an FYI.
This is all correct - basically, putting it in an IRA now and withdrawing it a few years from now for education would let you simply pay taxes on that money at a lower tax rate. That said, if you can get 2-4% gov't subsidized education loans, that's generally a better route to go if you can afford that option. You can generate a higher return in the market (though with some risk), so you'd basically be borrowing at 2-4% and generating a 10% return or whatever.
