<p>I think this will be a typical set of situations for parents who start their careers and family later that average base settled generation.
Some aspects of the dilemma leading to kids financial aid/merit aid
- savings start later.
- savings can take toll esp 401 K ( enron 401k disaster is my case )
- you may have saved a bit say 150 K in a mutual fund/savings account/stock</p>
<p>The question is -- is it beneficial to state the meager savings in 401 k + ofcourse all other savings !! that is being upfront and let the addmissions office consider the situation and factor in, for financial aid/merit aid.
- because if they just use your house _ savings + misc as teh factor then it is misleading. The parents will not have anything to retire on. </p>
<p>I will do anythings for my kids to get them a good education but my dilemma is also what will we do for retirememt since teh 401k is so meager ( 50 K ).
What does this forum think?</p>
<p>A lot of colleges want to know the complete picture, including how much you have saved etc. We did not get any financial aid, but if you tell the truth about your finances, you should be able to get better need-based aid at some colleges I know about. I can’t generalize, since my experience is very limited.</p>
<p>I can’t generalize much either. We were older to marry, older to have kids etc but the time from birth to college is the same whether you are 25, 35, 45 or 55. Age is a consideration in the financial aid calculators. Choose the list of colleges/unis accordingly. The only “mistake” we might have made was to have retirement diversified. There was no such thing as a 401K when we were younger and we didn’t move everything into IRAs over time. That does “hurt” because those assets (while earmarked in your personal financial plan to supplement retirement income but not in special retirement vehicles) is considered “available” to colleges. YMMV.</p>
<p>Okay, correct me if I am wrong. There are posters here who know more about FA than I do.</p>
<p>Frankly, I don’t think that showing a school how little you have, or how much you have in a retirement account will impact FA. Anything that you contribute to a retirement account the year before the kiddo goes to school, through Dec. of junior year of college, will be looked at as “available money for tuition”.</p>
<p>As an older parent, outside of retirement accounts you will be allowed to have a bit more in assets that are sheltered from the 5.6% (?) which will be expected to go toward one’s EFC (expected family contribution).</p>
<p>I’m not sure, because I do not pay attention to the details of how our FA was awarded. I know I should.</p>
<p>However, I decided at the beginning of the process to be completely upfront about everything we had.</p>
<p>I <em>do</em> think colleges take age into account and know older parents have to retire.</p>
<p>I <em>am</em> an older, middle-class parent as well, and we did quite well with FA. In fact, my first graduated virtually loan free, and my second will be a senior and will graduate completely loan free.</p>
<p>I don’t have any general advice either. DW and I did not expect any need-based FA due to our (thankfully) decent incomes. FAFSA/PROFILE-based FA was “as expected” which is to say … zero. We did OK with merit scholarships. YMMV.</p>
<p>I never bothered to inquire how colleges assessed our assets. Still, I can’t see how fibbing about your retirement accounts would be of much benefit.</p>
<p>I would advise complete disclosure. The forms all have tiny little print that says you’re providing full and truthful info, and they retain the right to change award packages if they find out otherwise.</p>
<p>Now the odds of their finding out about an omission or two are probably quite small, but it’s not something I’d want to wonder about during 4 years of college. For me, the little nagging worry wouldn’t be worth it.</p>
<p>When FA forms ask for savings/assets, they ALWAYS state specifically what they want you to include. FAFSA does NOT include retirement funds as assets, nor does it include your primary home. The Profile includes your home equity in your assets; the amount of retirement funds are not considered as assets, but are asked for in another question. I have never seen any ambiguities about whether or not to report retirement savings in any FA forms; if you are asking whether or not to lie by excluding information, that’s another question and one you need to answer. I have never seen any school that uses the Profile state their policy on how they use the retirement fund numbers.</p>
<p>Remember, there are 2 parts to retirement funds: the total amount in retirement vehicles AND the amount of untaxed dollars you put into retirement funds during the year being reported. For the latter, if for instance, you had 5k in pretax dollars taken out of your paycheck, you would have to add that back into your income for FA purposes. Again, these add backs to your income are clearly described on FA forms.</p>
<p>Not only are primary residence and retirement funds excluded from FAFSA, but older parents (especially older parents who are married) have a higher asset protection allowance, meaning the amount of savings/assets that is protected from financial aid calculations increases with the age of the older parent and increases if the custodial parent is married. </p>
<p>I believe parental assets over the income protection amount are assessed at 5.6%.</p>
<p>I suggest you run the financial aid calculator on College Board to see what you come up with under institutional method and financial method. The FM is an estimate of what your EFC could be under FAFSA (although almost all colleges will not meet that EFC). The IM is an estimate of what private colleges are likely to say you will have to pay if they meet need. Make sure your child has 1-2 schools that are “financial safeties,” schools which you could pay even if financial aid isn’t good. Chances are those will be instate options.</p>
<p>Before 401Ks if you wanted to save anything more than what you might receive in a defined benefit plan or social security…you saved. If you put $$ in mutual funds, stocks, bonds and never moved them into an IRA, annuity etc. then they are considered available.even if those $$ are “part of” your total retirement planning and what you need to live on until you are 100. There is no “generic” “retirement fund” different people, especially “older” parents may have done things differently. Read the instructions carefully…they are quite clear what gets counted and what doesn’t get counted.</p>
<p>My husband and I are in this situation; we spent years in grad school and had our children in our mid- to late 30s.</p>
<p>I don’t recall the FAFSA asking about retirement savings at all. Presumably therefore you could “shelter” savings by putting them in a 401K or 403B instead of keeping them in an all-purpose account. On the other hand, then they wouldn’t be available for college expenses.</p>
<p>In our case, our two-income academic family is not eligible for need-based aid and my son was not an outstanding enough student to get a merit scholarship at a really top-notch college or university, so if we had wanted merit aid, he would have had to compromise on the quality of the institution he would attend. We have saved diligently on an automatic-deduction plan for our two children since they were born, but we have still not accumulated enough to pay for an Ivy League or similar education without compromising our retirement savings. The solution for us is for our son to attend our excellent state flagship; our savings will easily cover the in-state tuition. Another option would be loans, but we are profoundly debt-averse and also unconvinced of the superiority of the private options in my son’s case. </p>
<p>Many of our friends are similarly situated, and they are almost all choosing the same route.</p>
<p>Money from retirement funds can be used for ‘qualified’ college expenses without incurring a penalty. I’m not promoting doing this, far from it, but it is important to know that this money is available if needed.</p>
<p>Yes entomom, but I think the particular plan has to stipulate that college expenses are considered hardship…I’m not entirely certain that withdrawals for college are available in every plan.</p>
<p>401(k) plans are not required to permit hardship distributions. In addition, even if a plan permits hardship distributions, it is not required to permit distributions to pay tuition, educational fees or room and board. However, in my experience, plans that give hardship distributions at all tend to allow them for any of the permitted reasons (including paying qualified educational expenses). </p>
<p>You could also consider a loan. Of course, the plan would have to permit loans, and the ability to borrow is limited (generally to the lesser of $50,000 or the ½ of the account balance). Loans also have to be repaid (or they end up being treated as taxable distributions), but you’re paying the interest to yourself.</p>
<p>I should also clarify entomom’s point. The exemption from the 10% tax does not apply to distributions from 401(k) plans. It only applies to IRAs.</p>
<p>I thank all of you for your responses. The intention is not to “cover up” retirement saving ( however meager); The intention was to show it all ( even if not needed yo show) so that the real situation between income needed for retiring and expenses towards kids college are sensitively judged. In some forms I believe retiremnet income is not a data point for any EFC calculation.</p>
<p>Now this 5.6% you mention … Is this the calculation for all 4 years put to gether or per year basis?</p>
<p>I have one kid ready for college - done extremely well n school and outside but I also have another kid who will join immediatley after the first one graduates; Hence all these questions and thank you for making things clearer</p>