<p>Basically, my dad was offered an early retirement package last February, and he took it. It was about 45,000. He didn't retire; he switched careers shortly after that and is now an interpreter for the deaf. At his old job, he was making about 30,000 a year, and he expects to make a little less with his new job. </p>
<p>The problem is, the retirement package makes it appear as if his income is 70,000+ dollars on the FAFSA, and there's no way to denote that that number is not remotely close. I'm not sure what to do. =/</p>
<p>Hopefully, those who know a lot about such matters will weigh in here.</p>
<p>I don’t know if “golden handshake” money is treated differently. I’m guessing that it’s not if the money was just put into regular savings and/or spent on various things. What did your dad do with the money?</p>
<p>What schools did you apply to?</p>
<p>This may cause a drop in aid for this year, but perhaps in subsequent years (when income returns to the $30k range), you’ll get more. </p>
<p>OP: I don’t know how retirement packages are treated on income tax returns, but whatever is reported as income on his return is what must be reported for FAFSA. But this may be one of those exceptional circumstances that could perhaps be explained to the colleges when you apply for FA. You might want to contact the FA offices and ask how you should go about demonstrating that this was a one-time bump in his income.</p>
<p>If the 45,000 was a lump sum, not a continuing pension, you could mention it wont be ongoing. When I asked about gifts, winnings, pensions, etc. at a FA meeting, I was told it would be considered for that year, if it was one time income, but if subsequent years, the incoming income was less, the numbers would be altered to show that.
Again, it’s where the money is, whether it was a lump sum, etc, but it was earned money for that year. Definitely call someone about it.</p>
<p>Check with the colleges. Also if your dad put it into an IRA or similar vehicle it won’t be “available” in august for colleges easily, however, the original $45,000 is still looked at as income (since payments into a retirement account in general are considered)…complex…so it is not a bad idea to call the colleges and see what you can do if anything. I have the same situation this year with a lump sum severance and the best I can do is “ask” if they can consider that amount in different light. It really ‘zoomed’ up my EFC this year and it’s my first year with 2 in college…the tiiming stinks. Your dad might check with an accountant, also, for any ideas although now that the year end has passed not so sure anything can change…but it never hurts to ask the professionals.</p>
<p>There are different sections on the fafsa to enter earned income and other income etc. I would put his actual wages under earned income and then put the $45k under a different category - whichever one best fits the situation. But I am certainly no expert on this.</p>
<p>^^^^The question on FAFSA about income from work is used to calculate allowances for work related taxes such as FICA. The allowance for FICA taxes is 7.65% of income from work and is deducted from your income in the EFC formula. It actually reduces your EFC. If the severance package incurred FICA taxes (I do not know offhand if severance does or not) do not omit it from the work earned from income question. This would make the EFC higher, not lower. </p>
<p>You can ask the schools if they will make a special circumstances adjustment as this is a one off situation. It is up to each school how they handle this.</p>