Financial aid after retirement

Paying for College
21

I just played around a little bit on Bowdoin’s NPC with some assumptions

$0 income

Home value $500,000
Mortgage $0

Savings/Checking - $20,000

Taxable accounts - $2,000,000

Child’s income - $0
Child’s savings - $2500

Bowdoin’s calculator came back with

$6,905 in grants
$2,200 in work study

Leaving $67,695 left for that hypothetical family to pay

If checking the NPC with ‘only’ $1,000,000 in taxable, all other pieces remaining the same -

Grant increases to $36,905
Work Study - $2200

Leaving $37,695 for the family to pay.

I would recommend playing with the NPCs - it will give some decent info looks like.

1 Like
22

I think you need to call each school and ask how they handle retirement. When our child applied to meets full need schools, we had a situation and found that they all handled it differently.

3 Likes
23

Your investments that are not tax sheltered are counted as assets. They would expect you to use those to pay for college. We have a friend with low salary but higher unsheltered assets due to an inheritance. They were earmarked for retirement but not in a retirement account (IRA, 401k etc). They are full pay. Their income and their remaining assets would indicate otherwise.

2 Likes
24

Thanks for doing that. That’s what H did. I just wonder if that’s accurate! I think I will call them and see what they say. They very well might say they just can’t determine any FA without seeing the CSS and it would be a while we could get a good answer since it wouldn’t be until the 2022 school year.

25

My parents have managed quite well and I am an only child so we realize we could potentially become full pay at any time. I was surprised on the CSS that some schools actually asked if a parent of the student is a trustee or beneficiary of a trust. It’s not like I can empty their bank account, sell their investments or kick them out of their home. It is entirely possible that I wouldn’t inherit anything during the 4 years of college anyway. It was just such a weird question, doesn’t really pertain to your situation but just an illustration that schools look at “assets” however they want to.

1 Like
26

You mention the 2022 school year. But it’s the 2020 return that would affect the 22-23 school year, the 2021 return that would affect 23-24. Although it’s possible that with your change in circumstance you could accelerate this, work with the FA office to use 2021 data earlier.

Anyway, I agree with folks saying it’ll depend on the school. I know several retired families with kids at generous schools, and they were pretty happy with the FA situation, didn’t feel there was any penalty for retiring “early”.

1 Like
27

They can determine your FA without the CSS profile. You will need to upload your documents to their site for them to review.

2 Likes
28

@homerdog

Your non-retirement assets are listed on the Profile. I’m assuming you mean liquid savings of some sort.

If your income is really $0, be prepared to be selected for verification. The school will justifiably want to know how you pay your bills.

Remember also, prior prior year is what is used on the financial aid application forms. When will your kiddo start college?

29

We have a S19 already in school and a D21 so this would not be something we would take effect until the 2022-23 school year if H retires sometime this year. We don’t fill out any forms right now because we have done our due diligence and know we won’t get any aid as things stand right now.

30

For the 2022-2023 school year, your income from 2020 will be used.

For the 2023-2024 school year, your income from 2021 will be used.

Just keep that in mind.

3 Likes
31

Right! I keep typing the wrong year. I understand!

32

Keep in mind it’s not unusual for there to be some unusual income generated with retirement - payout of vacation etc. So even if your husband retired right now, there would not be zero income in 2021 and it may be higher than you’re anticipating if he doesn’t work the entire year. So if your son is graduating in 2024, the double trailing year lookout makes this really about whether your D2021’s future school is going to give aid with only one in college as the relevant year when they’re both in college is not going to have zero income.

2 Likes
33

Don’t make any decisions to increase your financial aid which don’t make sense in the context of your entire net worth/portfolio.

I’ve seen a lot of people make a 25K mistake which nets them an extra 3K in aid. I’ve seen people liquidate, move, retitle, purchase assets where the fees/loss of capital outweigh the extra aid.

It is so easy to do “what if analyses” with CSS or Profile so you can visualize the upside in aid, but it’s harder to calculate the opportunity costs, fees, and actual erosion of your portfolio.

Presumably your college costs won’t be zero, even after retirement. So where is that money now? In some sort of asset? Are you going to have to liquidate at the bottom of the market in order to make the final tuition payments-- whereas if you hadn’t retired, or weren’t worried about financial aid, you’d be spending down other assets?

What happens to your kids health insurance post retirement? Can they stay on the retiree plan and if so, what does that cost? Those premiums are not locked in-- they can escalate dramatically since much of the cost that gets baked in to the retirement plan assumes that the “retiree” has qualified for social security and medicare (which someone in their 50’s doesn’t get).

If you indeed have zero earned income, you are still reporting dividends and capital gains on your non-401K assets. That’s income. And if someone in their 50’s is retiring I’m going to guess that this income is somewhat substantial. So in addition to your asset picture, you’ve still got income.

If it were me- I’d figure out if I could retire (if that’s the plan). I’d assume full pay because someone with enough assets to retire in their 50’s likely has enough assets to pay for college (not comfortably, but probably enough). College isn’t going to care what’s “earmarked” for retirement- an IRA is retirement, your stock in IBM and Microsoft which you intend to use for living expenses is not “earmarked” as far as financial aid is concerned.

If you are lucky enough that given your financial planning and the best way to spend down assets once H retired yields extra aid- great, you’ve won the lottery. But I would not be moving assets around intending to maximize my aid. A 52 year old needs enough financial runway for another 45 years and that’s a LOT of money. A mistake now can set you back a decade…

10 Likes
34

@homerdog Also, the CSS Profile asks if you are retired/not working by choice. There are no follow-up questions on the Profile, but I assume an individual school could ask any follow-up they wanted.

2 Likes
35

This is sadly our case too, but not due to inheritance. We have retirement assets that are not sheltered (our first home) but no fully funded retirement accounts because we relocated to the US late in the game. Colleges consider our non sheltered assets as fair game for them, although we know that we need those for retirement.

2 Likes
36

@VirginiaBelle are you saying you continue to own your first home but that is not your primary residence?

37

Don’t think that was to me? If you own your home but have equity or own it outright it counts as a college asset.

38

If you’re using the house as your primary residence, this is not true for FAFSA and for some schools that use Profile.

1 Like
39

@VirginiaBelle yes, my response was to you.

The FAFSA doesn’t use primary home equity at all.

Profile schools use primary home equity but in varying amounts…and most don’t use your full equity amount. And some colleges don’t use primary home equity at all.

1 Like
40

We are full pay and only filled out those once several years ago. My recollection was that was a question so I assumed it was considered. Sounds like it is some places and not others. Also surprised FASFA doesn’t use it considering our sky high EFC.