Confusion Timing of FAFSA app. vs. base year Roth

Paying for College
2

<p>Who is giving you this advice? Unless you are moving money from a regular savings account this will not make a difference on FAFSA.

  1. Money in retirement accounts such as IRAs are not reportable assets on FAFSA.
  2. The only way it would make a difference is if you are moving money from a regular savings account (which would have to be reported as an asset) to a retirement account (which would not have to be reported as an asset). Even then you have a certain amount of asset protection based on the number of parents and the age of the older parent, so only assets over this amount have any impact.
  3. as far as affects on income, Roth contributions are after tax dollars so the years contributions will not even be reported on FAFSA.
  4. Traditional IRA contributions are made with pretax dollars so will reduce the AGI reported on FAFSA. But the FAFSA EFC formula will add back and IRA contributions to the AGI before calculating the EFC as income is not allowed to be reduced by IRA contributions for financial aid calculations.
    5.The max you can contribute to an IRA in a year is around $5,000 ish. So if you are moving assets to protect them you will not be protecting much. The maximum amount a parent’s assets will have on the EFC is 5.6%. So 5,000 would impact the EFC by 280 (if the 5000 is over the protected asset amount).
  5. You have to complete a new FAFSA every year so all the base year stuff makes no difference.</p>