Roth IRA Contribution or MBA Program?
Hello everyone, I'm currently working in CorpFi (in my 20's, early in career, making about 75-80k tc) and looking to make a career switch by getting into an MBA program. I'm trying to figure out what to do with the rest of my 529 (college fund).
Recently, there was news that a maximum of $35,000 could be rolled over from a 529 into a Roth IRA. My parents are willing to make the maximum contribution ($6500) over 5.5 years, which would be huge for me saving money as I had intended to max that out as long as I made income that qualified for a Roth.
I would have roughly ~$40,000 in the 529 after a maximum contribution of $35k to the Roth.
However, I also have the option to pursue an MBA program, a M10-15 which I am safely assuming would be ~$200k. My parents are *not* willing to go out of pocket or expense this program or living expenses. I would have to take out a loan in order to do this.
So, do you think it would be smarter to use that 35k to go into the MBA program and take out less in loans? Or should I take on more debt and have my parents roll over the money into the Roth? While I cannot necessarily guarantee what job I will have after an MBA, I only intend to go to a M15 program and would target recruitment for high-paying lines of finance.
If anyone needs any additional details please let me know! Feedback on this forum has been fantastic when I've asked questions in the past.
Hey there! It sounds like you're in a bit of a pickle, but don't worry, we'll figure this out together.
Firstly, it's great that you're considering an MBA program. It can be a significant career booster, especially if you're aiming for high-paying lines of finance. However, it's also a substantial financial commitment, as you've noted.
On the other hand, contributing to a Roth IRA can be a smart move for your long-term financial health. The tax benefits can be substantial, especially if you're in a higher tax bracket.
Now, let's consider your options. If you use the $35k for your MBA program, you'll reduce your loan amount, which could save you a significant amount in interest over time. However, you'll also miss out on the potential growth and tax benefits of the Roth IRA.
If you choose to roll over the money into the Roth IRA, you'll have to take on more debt for your MBA. But, you'll also have more money growing tax-free for your retirement.
Ultimately, the decision depends on your personal financial goals and risk tolerance. If you're comfortable taking on more debt and believe in your ability to pay it off with a high-paying job post-MBA, then the Roth IRA might be the way to go. But if you're more risk-averse and want to minimize your debt load, then using the money for your MBA could be a better choice.
Remember, this is a big decision, and it might be helpful to consult with a financial advisor to understand all the implications. Good luck!
Sources: How much do you put into your 401k?, How much do you contribute to your 401k?
Get scholarships and get an MBA. It’s better to graduate from a T50 program with no debt than a T15 with $150k in debt. Especially in today’s interest rate market.
Also, be aware that T15 programs have plenty of scholarship opportunities, and that there are grants available outside of the schools as well. Do your research, but the moral of the story is to get your MBA from the best school possible while takin on as little debt as possible.
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