mcat2, good question. To be honest, I don’t have an exact answer. Because I don’t do booking for some of these accounts. My guess is that 2/3 of the increases are from the gains from the investments.
my employer has started some new programs to help us save more. Now we enjoy a double digit matching to 401K and a double digit discount of company stock purchase. We could sell those stocks the very next day with a small fee. So, if we count all the benefits, my 401K contribution, and our Roth IRAs, starting this year, we should easily make a significant contribution to our accounts.
Just to be clear - that does not mean we could have a lot extra cash to spend because these are benefits and not incomes.
When I worked for the state, there was a deferred comp plan that people could participate in. It was NON-MATCHING, but pretax income. I contributed the max, which I believe was 20% of your income at the time. Since I ddin’t work long, I wasn’t able to participate long, but over the years, it has grown significantly. Was also able to roll a tIRA into it so I could do backdoor ROTH IRAs.
I wonder if contributing a significant portion of one’s salary under a deferred comp plan during the kids’ college years is a strategy to achieve excellent financial aid from top schools. Do such plans limit how much can be deferred?
Some of the FAid forms inquire about retirement assets – for those forms, I believe you’d have to report the deferred comp and all other retirement funds. Some require you to list COLA and any housing or other non-monetary compensation. We never sought FAId, so I’m not positive how much things count or don’t; FAid forum folks are probably a better source for such info.
A friend of mine told me that you didn’t have to list as much for the FAFSA as you did for CSS. One’s business and home equity wasn’t used on the FAFSA, but it was on the CSS. They had very substantial assets, but not a very high annual income, and got FA…I’m assuming based on the FAFSA, not on CSS.
I guess the main thing is to fill out both, and maybe qualify for different FA packages. You never know.
Nobody knows how CS/Profile schools use information about retirement assets. You can probably assume they are looking to see if you have “too much”, relative to your age and especially relative to your reported income.
I do not believe that is accurate. We may not know the specifics of how schools use the CSS figures in their calculation of need, but we do know the additional information that the profile requests and utilizes in their calculation of need. They also expect the student to contribute, unlike the FAFSA. I have been to presentations where the schools FA/ enrollment management staff were quite open and revealing with their FA approach.
I would imagine that only qualified deferred compensation is protected in financial aid calculations. Non-qualified deferred comp is not, and IMO, why should it?
Contributions to non-qualified accounts would of course be counted as income, balances in those accounts are what we are discussing, right? The one year we applied for financial aid was the one that we had two kids in school, only one income, but very large balances in non-qualified accounts. There is no way either of the 2 private universities would have provided that much aid if they had not excluded those accounts. Since the money was not yet “ours” (general obligation of MegaCorp) it must not have been counted as an asset, or most it was treated as a retirement asset.
@MomofJandL, you say it would “of course be counted as income” and yet excluded by the schools. ??
Hypothetical: I strike an arrangement with my employer. I make $250k/year, but for the next 5 years, they will pay me $50k/year as current income, and I will defer $800k to be paid with interest five years hence. That, as I understand it, is non-qualified deferred comp. Is it considered for FA purposes? Is that appropriate treatment?
ETA: I see you distinguish between current income and balances. Missed that. Sorry, have to think about it and I’m a slow thinker so I’ll probably miss the edit cutoff.
@IxnayBob, the universities get to decide what is appropriate, but that is how they treated it. We disclosed everything and were stunned by the aid given. Would have preferred both incomes, but everybody is entitled to one Really Bad Year.
Notrichenough- you said “Nobody knows how CS/Profile schools use information about retirement assets.”. I don’t agree. You didn’t say "we don’t know the specifics (I did). . They are different statements. Some will tell you, for example, how much of the home equity they calculate, etc. Its not all smoke and mirrors (though some can be). One school shared their table- rating a student on a 1-5 scale, and based on that, what % of need they would offer. They talked about how they use the profile info. Its not all secretive, though their exact formula is not going to be disclosed, since its probably not a firm policy.
Yes. some schools will actually tell you how they treat home equity and how much (if any) will be counted as an asset.
But I have not seen any school actually say “we count retirement assets in excess of 3x of income” or whatever. I’ve never seen it reported for or by any CSS/Profile school as to what exactly they are doing with this number or why they collect it. Perhaps I am wrong, and if you know of some schools that have shared this, if so I would love to know.
“Nobody knows how CS/Profile schools use information about retirement assets.” Well obviously the people that work there know.
How does “We may not know the specifics of how schools use the CSS figures in their calculation of need, but we do know the additional information that the profile requests and utilizes in their calculation of need.” get interpreted as something different than “we don’t know how schools are using information about retirement assets to calculate need?” You said it yourself, we don’t know the specifics - are retirement assets counted or not, how much is counted, is there a threshold, is it related to income or other assets, if you don’t have (what they deem to be) enough does it affect how other assets or income is counted, if you have “too much” what percentage is counted, do they factor in the tax and penalties if they expect you to tap it, how is future pension income treated, etc.
Well, I’ve explained the difference in wording as best I can. No point in repeating what I posted. The rest I cannot help with. That said, re: retirement assets, they don’t get counted on the FAFSA or the CSS. So it s a moot point. So I guess we do know how they use that information. They don’t.
Ixnay, you were not slow-- you got your edit in 1 minute after your post!!
Of course, no one ever makes a snide comment 3:-O Nor are they hypocritical about it. Nope. Never.
Read again- the CSS does not consider retirement income. Thats the beauty of those who can pull it off deferring their income during the college years into retirement plans.
and I’m a slow thinker so I’ll probably miss the edit cutoff.
