<p>I would be surprised if there were really so few of us around. I think people are just waking up to what’s happening with interest rates. That if you want your money really safe, you may have virtually no income from it. And there will be baby boomers who are retiring while kids are still going to college who don’t have fixed pensions.</p>
<p>You are limited in how much money you can put in a 401K but I guess not an annuity. Between a house and an annuity, who knows? but it may not be worth it.</p>
<p>Is the lump sum from a pension plan? If so, you can roll it into an IRA and then it won’t be counted.</p>
<p>If it is not from a pension plan, it will be counted as an asset unless you shelter it in some way like a retirement annuity or life insurance. Cumulatively, you will be expected to contribute about 20% of it towards college, assuming you don’t spend any of it for anything else.</p>
<p>How big of a lump are we talking about?</p>
<p>And yes, it is completely bogus that those who have a pension get to shelter a huge asset, and those those have built up a large IRA/401k get to shelter a huge asset, but those who have saved money for retirement and can’t for whatever reason put it in an IRA or 401k don’t get to shelter it. That’s the system though.</p>
<p>Thanks, notrich. I called a university and got the scoop about the 20%. </p>
<p>It’s also bogus that grandparent contributions and home equity aren’t factored in. I think the only way to fix the system is to go to a European (or maybe rest-of-the-world) system where college is pretty much paid for by the state. But that doesn’t help us now.</p>
<p>Well, I thought the parent conribution from assets was 5.6% and the student contribution from his assets is what’s assessed at 20%. </p>
<p>At this point, comparing the dialogue to the original post, I am confused. I thought the starting concern was “virtually no income” but a lump sum. Now, we’re looking at tying up the lump sum in sheltered investments. Amazon, are you trying to say, without saying, that you have other savings/investments that prevent you from using the Simplified Means Test???</p>
<p>What difference does it make - 1 lump sum, 2 lump sums. Don’t worry about it. Conversation is about no income - living off of savings. Which I think many retirees will be doing. Interest rates are now about zero. If you have money it is not earning interest.</p>
<p>Interest rates won’t stay this low forever, certainly not for the 30 years of your retirement. 30 years ago I had a cd that was paying over 15% interest.</p>
<p>If you need interest income now, you might have to take more risk than putting your money in a cd in the bank, or go longer term. I’ve seen ads for 3 year cds paying 2.5%.</p>
<p>*Conversation is about no income - living off of savings. Which I think many retirees will be doing. Interest rates are now about zero. If you have money it is not earning interest. *</p>
<p>Yes and no.</p>
<p>Many will be living off social security payments (income), 401k or other retirement acct disbursements, monthly pension payments, etc.</p>
<p>I don’t think “many” will have a lump sum in a money market account (or similar) which is their sole source of money. </p>
There’s no difference really between having a lump of money in a 401k account and a lump of money in a money market, if it’s been targeted for retirement.</p>
<p>Very few people have enough saved up that they can live off the interest (even assuming a decent interest rate) without tapping principal, unless you invest a little more aggressively than bank cds so you get some growth.</p>
<p>Yes, we’ll get social security. This all got really off-track. I really only want to discuss college financial aid. I was just justifying my desire to get financial aid if possible because people with pensions and home equity get it. Wanted to fend off possible attacks such as those directed at the immigrant family with high savings from the other thread.</p>
<p>All the wishing about what “should be” is a waste of time. Lobby Congress if you don’t like the way the aid formula works, as it is mandated by Congress. Work through the EFC formulas as suggested. That is the only way you will know what your personal situation will be.</p>
<p>Kelsmom is a REAL financial aid officer for a university so she knows how this all works. I wouldn’t diss her comments. She knows what she’s talking about. She’s telling you that it won’t do any good complaining …it is what it is.</p>
<p>If you’re concerned that your child won’t get FA and you can’t pay for college, then your only choices are…</p>
<p>1) child goes to a CC for two years and then transfers</p>
<p>2) child commutes to a local state university</p>
<p>3) child gets a big merit scholarship and parents/loans pay for the rest.</p>
<p>Anyway…you may feel that things went off topic, but we needed clarification to determine your situation. On one hand you made it sound like you’ll have no income, just this big lump sum. On the other hand you’ve suggested that your H may get another job and you will get Social security. Not the same as having no income and living only on lump sum.</p>
<p>There’s no difference really between having a lump of money in a 401k account and a lump of money in a money market, if it’s been targeted for retirement. </p>
<p>I could be wrong, but I don’t think you can just stick money in a money market and say it’s targeted for retirement unless there is some kind of money market accts that have some kind of retirement aspect attached like 401ks do.</p>
<p>Didn’t intentionally “diss”. Didn’t really want an analysis of my life situation but just information on financial aid at colleges and how it works. What they look at and what they don’t look at.</p>
<p>*Didn’t really want an analysis of my life situation but just information on financial aid at colleges and how it works. What they look at and what they don’t look at. *</p>
<p>LOL…then you don’t understand FA. Applying for FA is like a full body exam…especially if your child is applying for a school that meets need and will want you to also fill out CSS Profile or their own forms. They will do an analysis of your situation because they’ll ask all kinds of questions…that’s why we asked the questions that we did…your life situation will make a difference for aid.</p>
<p>however, you just want a simple answer by giving only one aspect…huge lump sum money. OK…you won’t get aid.</p>
<p>Mom2, you rock. And, I learn from Kelsmom all the time.
Amazon, you got a lot of great advice here. From a diverse group of parents that has done it’s own homework. We played with the FAFSA Forecaster, looked at the FAFSA and CSS worksheets, dragged ourselves through nights of internet research to figure out how we were supposed to fill out forms, what colleges offer what, where there could be a good deal and where chances dwindled. Some of us have kids in school now, some have recent grads, some have pro experience and some are, like you, older. A great group.
I think it’s quite fair to say, we kept at the posting because we thought your situation was no income, maybe no job, no health insurance, a problematic lump sum, housing decision- and, we each learned from each other along the way.
I think we’re all ready to say goodnight and good luck.</p>
<p>Contradictory advice here. From Kelsmom - look through formulas, that’s the only way you’ll know and lookingforward - they perhaps look at things like age, job situation? One person says it’s holistic and the other says it’s formulaic.</p>
<p>I didn’t say “huge” lump sum. The assumption was that when son starts college, we won’t have “income” therefore no social security (at that time), perhaps a bit of interest, and no job. If he gets a job, obviously things will be different. Paying for health insurance and expenses out of savings. I wasn’t asking anyone to worry about us, just wondering how colleges look at various forms of assets - money vs. pensions and home equity.</p>
If I save for retirement by putting a big pile of money in an IRA, or by putting a big pile of money in a money market, there isn’t a big difference in real-life terms.</p>
<p>In terms of what happens with FAFSA, of course, there is a huge difference, and that’s what the OP was griping about - if you are unable for whatever reason to put your retirement savings into a specific type of of account, you are “penalized” for financial aid.</p>
<p>Is it inequitable or unfair? Maybe. There are lots of inequities about FAFSA, depending on your point of view. But there is a limit to how “fair” something can be when all the data has to fit on a form only a couple of pages long. You can’t account for every variation in every person’s life circumstances.</p>
<p>It is what it is. I don’t share kelsmom’s opinion that it is a “waste of time” to talk or complain about it, because I think it is part of the process of coming to terms with it and understanding how it works. But then, I don’t have to listen to people complaining all day long as part of my job.</p>
<p>There are minor adustments for age and jobs if you both work, but they don’t make all that much difference.</p>
<p>Whatever your EFC comes out to be, it is really only for <em>Federal</em> aid programs. Public schools will use this number as well, and many privates, but they are not obligated to give you aid based on your EFC. The top private schools tend to use the CSS Profile or their own form, and they all have their own formulas. Very little information is publicly available on how they come up with their numbers.</p>
<p>The “holistic” part comes in when a school will consider your special circumstances, and maybe make adjustments in aid from the school, but I don’t think they can do that for Federal aid.</p>
<p>And remember that while EFC stands for “expected family contribution”, it really means “minimum family contribution”.</p>