William Lako: Found money: Should you use an old 401(k) to pay off a child's student loans?

Parents generally want to help their children, even well into adulthood. This desire should be integrated into investors’ financial plans, as parents need to understand how it affects their finances and distribution strategy when portfolio assets are needed.

One situation I have encountered is when an investor has “found” an old 401(k) account at a previous employer and wants to use it to pay down their child’s student loans. For whatever reason, when leaving their former employer, the investor never rolled the account into an IRA or their new employer’s plan. The funds have grown over the years and have not been factored into the investor’s financial plan—essentially, “found money.” This type of mental accounting leads investors to treat money differently because it comes from an unexpected source. While most of us would love to miraculously acquire several thousand dollars, the reality is an investor’s net worth is no different than if all their money were in one account.