401k rollover to a 529 College Savings

[amclaughlin42]

Okay, so I am going back to school come August 23rd. I am taking a less paying job, for the flexibility. I know I can rollover to an IRA, but it would be more beneficial to roll it over something I can use for education purposes. I've done some research. Between mine and employer contributions, I've only got about $1450 in my 401K. I've read since I am leaving my job this is an option. Would I get to roll my Employer contributions as well as mine, even though I am not 100% vested? Because if I just cash it out, I would use it for eduction expenses anyways. If I do it this way, I am not penalized, I do know that it is taxable because it is counted as income. Does anyone have info on this? Financially this would make the most sense. I will start vesting again into a 401K once I have graduated. I will be 23 year old when starting school. So starting over on my 401K wont affect me as harshly. 

I do not currently have a 529, but one can be set up at anytime. I bank with Chase. Is there any benefits to using the same bank VS different banks? 

[Anonymous]

Unfortunately, the law does not permit a tax-free rollover from a retirement account to a 529 education savings.  Any distribution you take from your 401k for the purpose of depositing to a 529 plan will be taxed and subject to an early withdrawal penalty.

You will not retain whatever hasn't been vested from your employer contributions.

[amclaughlin42]

Even though I am 100% Vested I dont get to keep employer contributions? I've read it would be subject to tax because it counted as income, but not early withdraw penalty

[amclaughlin42]

I've also read that I can roll over to a traditionl IRA and withdraw for higher education expenses without being penalized. Does that count for things like books and laptops? Are they under qualified expenses?

[Anonymous]

They automatically take out 20 percent for federal taxes.   Plus if you have to pay the penalty it is 10 percent more.  And if you have to pay state taxes on there won't be much left.  I would just roll it over into an IRA.  

[enjoimorenow]

With such a small amount, after taxes you are barely going to have $1,000.  I don't think $1,000 is going to put much of a dent in any college education which means you will need to find another way to pay it anyways like student loans or scholarships/grants.  I just don't see how it's worth it for $1,000.  I'd just figure out a way to pay that out of pocket or add it to your student loans instead.