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things to do for more college financial aide
Old 03-04-2015, 02:56 PM   #1
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things to do for more college financial aide

Will have 2 daughters going to college in 2016. I've been ER now for 5 years and as of 2 years ago started withdrawing funds from my IRA's for income.

But as this is considered income, I was thinking perhaps I should take money from my ROTH or non-IRA pots instead to reduce my reported W-2 income in order to qualify for more financial aide.

I'm torn though as I would like to conserve my ROTH and draw down my tRIA so that I don't get killed with RMD taxes at 70.

So which poison would get me the most likely benifits?
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Old 03-04-2015, 06:25 PM   #2
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Depends what form of financial aid you seek. Loans or need based grants/scholarships ?

Also your age now? How far from 70.5 are you and can you do Roth conversions after college tuition days are behind you ?

If you get,say 10 grand in free and clear scholarship money in financial aid by taking from roth and after tax (keeping magi low), that 10k benefit should more than offset the tax liability created by a 10k w/d taken from tIRA as a MWD at age 70.5 --

In this case I would lower MaGI to maximize your kids chance for aid. You can always change your strategy next year if you get nothing in increments financial aid.
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things to do for more college financial aide
Old 03-04-2015, 06:47 PM   #3
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things to do for more college financial aide

Quote:
Originally Posted by dtbach View Post
Will have 2 daughters going to college in 2016. I've been ER now for 5 years and as of 2 years ago started withdrawing funds from my IRA's for income.

But as this is considered income, I was thinking perhaps I should take money from my ROTH or non-IRA pots instead to reduce my reported W-2 income in order to qualify for more financial aide.

I'm torn though as I would like to conserve my ROTH and draw down my tRIA so that I don't get killed with RMD taxes at 70.

So which poison would get me the most likely benifits?

Just get on Fafsa.gov and go through a trial version of what you will complete each year starting when they are seniors in HS. I did it two months ago. I really don't remember that taking from a Roth over an IRA would make any difference to them. It's all about current assets. Yours and your child's.


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Old 03-04-2015, 07:20 PM   #4
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It is not just about income, but also about assets. We drove our income down to a mid-5-figure amount and got no financial aid.

I had two kids in college last year. Still no financial aid.

Your 2015 tax return is the one used for financial aid application, so just spend what you have in your bank account and nothing else. Perhaps sell a car or two to pay expenses.

I am told that Roth IRA withdrawals count as income for the FAFSA, so check that out.
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Old 03-04-2015, 08:01 PM   #5
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On the asset front, there is a strange mix of what is countable and what is not for FAFSA. In general, businesses under 100 employees, retirement accounts and personal residences do not count. I believe you could be the sole owner of a business like craigslist (40 employees) and live in a $5 million dollar home and it wouldn't count for FAFSA.

The best source I have found is Forbes online. This is a good place to start:

2015 Guide To FAFSA, CSS Profile, College Financial Aid And Expected Family Contribution (EFC) - Forbes
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Old 03-04-2015, 08:23 PM   #6
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Likewise IRA and 401k accounts do not count, but money in taxable accounts - even if it is intended for retirement - does count.
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Old 03-04-2015, 11:25 PM   #7
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Google FAFSA Simplified Needs. If you qualify, all assets are disregarded. EFC is based on both assets and income. As others pointed out, not all assets are counted such as primary home. If you have to fill out the Profile, then none of these apply.
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Old 03-07-2015, 08:43 AM   #8
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Thanks folks!


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