retirement in mid-2019 . . . how do I seek need-based aid for beyond then?

I plan to file the FAFSA and CSS Profile in October. My daughter will begin college in September 2019.

I’m expecting we will receive no need-based financial aid for the first two years. (2019-2020 and 2020-2021 school years) Our family income, as reflected in the “prior prior” year, i.e., our 2017 tax return, is relatively too high for “demonstrated financial need” at nearly all colleges. I’ve run rough, tentative numbers, using the net price calculators. Same result for my daughter’s sophomore year, because our 2018 tax return will continue to reflect my high salary income through all of 2018.

However, I plan to retire in mid-2019. Our family income then will be lower, and that would be reflected on the annually-refiled FAFSA and CSS Profile. I understand that pension income and taxable withdrawals from a 401k or IRA would count toward the expected family contribution, but I also could withdraw from a Roth account, thus suppressing taxable income.

So, when my daughter is a junior (2021-2022 school year), our 2019 tax return, along with the corresponding FAFSA and CSS Profile, will likely show some demonstrated financial need. And when she is a senior, our 2020 tax return is very likely to show financial need.

What can I do now, to try to assure need-based aid AFTER paying the full sticker price for the first two years?

I assume that no college would make a firm commitment except on an annual basis? Some colleges though, especially the selective liberal arts colleges, claim to meet 100 percent of demonstrated need annually. Perhaps I could obtain a non-binding commitment as to the future? Anyone had any experience in that regard?

I would be glad to provide tentative numbers to the financial aid offices and ask them for some assurance of meeting 100 percent of demonstrated financial need, in the form of grants, for the later years. My worst-case scenario is having to pay the full sticker price for all four years, even after retiring on permanently lower income.

It sounds like you’re already doing everything right, and just need to get comfortable with a certain level of uncertainty and risk. It is reasonable to expect that if your income drops by a large enough amount, you’ll begin to get some FA from a college that claims to cover 100% of demonstrated need. Use the NPCs to estimate the future net cost in this year’s dollars based on the income/asset numbers you anticipate.

How old are you? Are you electing to retire early or are you well within retirement age? What are your assets like in non-retirement funds? It’s not just current income that is considered.

@jasred - you might want to ask the mods to move this thread to the FA forum. You may get more helpful responses there. Yes, schools look first at income, but then they look at assets, and IIRC pulling money from retirement funds will be seen as income.

I think you need to look at this from the college’s point of view. Why would they commit to giving you tens of thousands of dollars so you can retire early? The decision to retire is a personal choice. I can understand why a college might reconsider the aid package if there’s a huge medical expense or an unexpected job loss, but they have nothing to gain by funding people’s early retirement. If paying full price for the last 2 years will be a challenge if you retire, then I’d put off retirement.

I am no expert but even if a Roth IRA withdrawal is not taxable income for federal.tax return purposes, it might still be income for the FAFSA.

mommdc is correct; a qualified Roth IRA withdrawal that is not taxable must still be reported on FAFSA as untaxed income, so this strategy won’t help reduce EFC.

I’m curious as to how someone provides a “non-binding commitment.” If it’s non-binding, it’s not a commitment. In any event, need-based aid is typically calculated anew every academic year, so a change in reportable income and/or assets could very well result in a different EFC, and therefore change the need-based aid awarded. But make sure you check the policies of each school your daughter is targeting.

@austinmshauri There are professions with mandatory retirement ages, so early retirement may not be a personal choice.

I think the most you can do is apply for a change in circumstances review when the time comes. You have to file the FAFSA/CSS with the information you have, which will be your tax return info for 2018, then 2019. If there is a big change in income, some schools will reconsider the FA.

Nope, no guaranty they will do that.

In the worst case scenario, your kid will only be offered the standard federal loans. With only that amount of aid, can your family afford the colleges on her list after your income drops? With only that amount of aid, are there any colleges or universities that your family could afford?

Yes, do make appointments with the head of the financial aid office at each of the places she’s interested in, and have a discusion about how their aid works. You will not be the first person who has asked these questions.

However, your daughter may need to come up with a cheaper list over all in order to guarantee affordability for all four years.

What can you do?

1. Make sure your kid goes to a college that guarantees to meet full need for all students. Otherwise your change in income might not matter one bit in terms of increased aid if your income goes down. Most colleges do not meet full need for all.
2. Pick an affordable school for all four years. Plan ahead. Bank money now while you are working.
3. Look for schools where your kiddo will garner significant guaranteed merit aid. Merit aid is not income dependent.
4. To get accepted to colleges that guarantee to meet full need for all, your kid will need to have very tippy top grads as well as very tippy top SAT or ACT scores. Even with that, these schools accept 10% or so if kids...which means that 90% or so are rejected. Even tippy top students should not view these colleges as a slam dunk.
5. Have your kiddo start looking at options that are going to be within the price point for your family.
6. Do you have to retire? Can you work part time? What about your spouse? You may need to defer retirement if you can. Many people do this until their kiddos are out of college.

P.S. there is NO college in the country who is going to give you an estimate of your need based aid for the 2021-2022 academic year…which is the one that will use the 2019 tax information. At this point, no college even knows what their cost of attendance will be for that year…never mind their need based aid awarding policies. That is THREE years from now.

Very helpful thoughts! Thank you all. There’s no guarantees, understood. I’ll encourage my daughter though to take a good look at colleges that tend to meet full need (via grants, mostly or entirely). I acknowledge that the meet-full-need category is somewhat rare. As she gets admission offers, or maybe sooner, I’ll discuss years 3 and 4 with their financial aid offices, to get as much insight as possible into their decision processes.

One factor, among the many, is the financial strength of each college. And the extent to which financial strength may be deployed to mitigate the sticker price (versus, say, construction projects, research budgets and other good things). If anyone has links to sites comparing the colleges on their capacity to share the burden over four years, please send. Anecdotal information also welcome.

Everyone’s focus is on the first year, quite understandably, but do we have a sense (if not hard data) about what colleges have the resources and a proven track record of meeting full demonstrated need across four years?

Everyone's focus is on the first year, quite understandably, but do we have a sense (if not hard data) about what colleges have the resources and a proven track record of meeting full demonstrated need across four years?<<<

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I would say that the non FA crowd is focused on all 4 years, I think that is what you need to do too. This is not about the colleges’ resources, but yours. Make sure you have affordable schools. Your focus on meeting full needs is assuming you HAVE need as assessed by the institution. You may not be assessed as having any need at all.

a natural fear is that once income goes down, the school may not make up for the loss with aid.

Let’s play “what if.” What if you apply for aid for your continuing student with your reduced retiirement income, and the school does not give you more or enough aid. What would you do then? And would you then regret not continuing to work another year or two?

If your kiddo gets MERIT aid, this is usually for each of the four years. You would need to read the provisions of her awards.

Like i said earlier…it’s nice to hope for acceptance to a college that meets full need for all…but really, most of those are NOT a slam dunk for applicants. They have VERY low acceptance rates.

For need based aid…you are NOT going to get a pre-read on years 3 and 4 when your child enrolls as a freshman. All they will say is “if your financial situation remains the same, your need based aid will likely remain the same”.

But you already know that your financial situation has the potential to change.

You haven’t resigned. You don’t know IF you will or won’t have another job. You haven’t mentioned your spouse’s income. And as you noted, pensions, retirement income and social security ALL will still be income once you retire.

You will still be expected to pay your family contribution based on the school calculation.

I realize some jobs do require mandatory retirement at a certain age…but if this is not the case, perhaps delaying retirement is a possibility.

If you can delay taxable retirement fund distributions then it might make sense to take a big Roth withdrawal in 2018. Better to have that money in savings than as income. Plus you could pay off cars, house, pay full year of college next year, health insurance, and anything else you can prepay to reduce future expenses as well as reduce balance in savings prior to reporting on fafsa/css in 2019. (If school looks at home equity then that’d be a wash, but would leave you without a mortgage payment in her last two years, which would allow you to keep expenses and voluntary distributions low). Just a thought, I’d check it with the experts here before going down that path.

I have 2 kids in college now, but will only have 1 the next 2 years. When trying to understand the impact, I just played around with the NPC for the college. That’s what’s great about playing around with NPCs - that you can see various scenarios. Of course there are no guarantees, but I think it is the most valuable tool out there to see the impact of a future scenario.

To be honest, I think that your best option is to determine your own best estimate of how much you will be able to pay for year 3 and year 4 without any aid other than the federal student loan (each of those years your kid can borrow $7,500 for a total of $15,000). Go shopping for places that fall into that price range. Those can be the back-up plan in case your kid doesn’t land big merit or get into one of the meets full needs places. In fact, you wouldn’t need to absolutely bare-bones the estimate for years 3 and 4 if what you could save during years 1 and 2 would be set aside for the later years.

Not all the Meet Full Need Colleges are in the 10% admit range. Google a list and then check the individuals. University of Richmond, eg, is about 33%%, Kenyon 24%, Union college 38%.

But it would help to know what your daughter’s current college targets may be and her unweighted gpa and scores.

Colleges tend to plan their near-future financial fitness a bit ahead. Unless we have a 2008-like downturn, or unless you are looking at schools already in a tenuous position (those are mostly very far down the list,) I’d guess most colleges are going to be ok through 2023. Don’t get overly analytical with this now. First you want to find the true matches and safeties for the application deadline. And for some, match is more than her stats and some hs activities.

Did you run the NPC using your retirement income her junior year? It’s this year’s policy/formula but gives an idea how aid may increase or not. Just remember many will increase tuition and room/board every year or two.

You can also seek merit aid. Again, we’d need to know her stats to help with that.