Colleges say retirement funds like IRA, 401K are not considered as assets for FA purpose.
How does this apply to people who are already retired, living on retirement distribution and still have kids going to college?
First of all, those retirement fund balances are not counted as assets for FAFSA. But colleges who use other means to determine need-based FA may include them.
Not sure what your question is. What are you asking? Are you asking if distributions are counted as income for retired people? Or if balances are still ignored as assets for FAFSA purposes?
The distributions you get from your retirement are income. For example, pensions, social,security, IRA or TSA distributions. These are income.
These items will appear someplace on your tax return as well.
The balances in those retirement accounts are still not considered assets. Only the distributions are considered income. As with any other income…if you take your distribution and then put it in a regular savings account…that regular,savings account will count as an asset.
But the distribution is voluntarily withdrawn, except for the minimum required distribution. Do colleges expect retired parents to withdraw more to cover college costs?
No colleges do not dictate how much you withdraw from your retirement accounts. That is up to you.
Profile schools do,ask the value of your retirement accounts. I suppose it is possible that IF your account value is very high, and you have a $0 or very low calculated family contribution, they could expect more. But I’ve never heard of a college mandating that a retiree take more out of their retirement accounts to pay college bills.
@Madison85 Please see my post #3. Sorry I did not make it clear.
Most colleges (and FAFSA) only care about what you are putting in or taking out of your accounts during the tax year. If you take out $50k, then that’s your income for the year.
As thumper said, if a Profile schools sees you have $1M in retirement funds and are only taking the minimum, they might ‘gap’ you and then you can either take out more or find another way to fund that gap.
^ Yes, I would think so for 1M+ retirees. But a large number of peope only have about 300K - 600K. That will barely cover medical costs when they are getting older.
Then the school who do consider retirement plans will consider the $300K or $600k that those people have. You keep asking a hypothetical, and we’re giving you the best info we have for a general case. At a non-profile school, only the withdrawals (and contributions) during that tax year will be considered. At most profiles schools, all the assets are considered but, according to the comments above, most schools will not consider the corpus of the retirement account. Any one school can do as it likes. If you are worried about it with one school, ask what its policy is.
Colleges are not in the business of caring about or even considering whether parents will have enough $ for retirement.
$$ is $$ to them…