<p>Starting at the beginning of November, my company will start matching any contributions I make into a 401K retirement plan up to 6%. I'm planning on contributing at least the 6%, but I was wondering if I should contribute the maximum I can which would be about 50% of paycheck and maybe even some of my cash earned from the job earlier. The only reason I would do this would be to get rid of my assets since I know that retirement assets aren't counted against you on the fafsa.</p>
<p>Why don’t you fund a Roth IRA instead if you are within the income limits for it? After getting the 401K match, of course.</p>
<p>I would definitely be open to funding a Roth IRA after the match. Since I’m a student would you still recommend the roth over the 529. Also by contributing more of my income to a retirement asset to empty my savings, will that hurt or benefit me in getting more financial aid. Im confused on how student taxed income ties into this</p>
<p>It is wonderful you are financing your retirement at such a young age. While your peers are spending money now on stupid things such as cool-looking wheels for their cars, they will look back with regret when they want to retire and don’t have the money to do so.
However, if you put too much away now for your retirement, you won’t have money for the things you will need soon, such as a new car when yours is wrecked by a drunk driver (you need an emergency fund), a honeymoon, or a down payment on a house.
Always take advantage of a 401k match, but don’t go over that until you know you have the extra money.</p>
<p>Thomas…the financial aid calculations are heavily weighted towards income. Any money you put IN a retirement account for the tax year of your FAFSA is added BACK IN as income for need based aid calculation purposes. The balance IN the 401k accounts is not treated as an asset, but the contribution you make during the year is.</p>
<p>Also, there is a yearly dollar limit on how much you can contribute to a 401k…I think it is $17,500 but I’m not sure.</p>
<p>You just might be doing these financial gymnastics for no reason. What is your income including these contributions to a 401k? That is what the FAFSA (Profile formulas, for Profile schools) looks at.</p>
<p>Who are you setting up a 529 for? </p>
<p>I would suggest funding your retirement account. Of you are able, do as much as will be matched by your employer. Then consider what to else to do. Could be a Roth, if you are eligible. As noted, just make sure you have an account somewhere that can pay six months of your living expenses in the event you lose your job. Fund THAT too.</p>
<p>^ Thumper is absolutely right that current retirement contributions are added back in to income so they would not be shielded on FAFSA. Definitely contribute to get your matching share, then assess where savings would best be placed. It might be a 529 if you KNOW you will be continuing your education. If you’re still a student and not earning a great deal it might be moot.</p>
<p>If that money will really be an asset…that is, you dont plan to spend it and instead will put it into a savings vehicle…then a 401K is a good choice, provided you understand its a retirement plan and you dont need that money any time soon. </p>
<p>But agree with other posts that wont help you hide your income. The only vehicle that I have found that works for that are FSA’s (employer sponsored health savings accounts).</p>