<p>Does it make any sense to do this to shelter your kid'ds earnings from the aid formulas?</p>
<p>I'm not an expert on this but it makes sense to me & I encouraged my son to do that..... but he didn't take my advice.... But as far as I know, assets in the Roth IRA don't have to be reported on the FAFSA, and the contributions will not show up on the tax return because they cannot be deducted like a regular IRA. Plus I believe that money can be withdrawn from the Roth IRA without the usual penalties if it is used to pay tuition expenses.</p>
<p>Hi calmom- do you know if it has to be "documented" income to be put in a Roth IRA? What about babysitting money, for example?</p>
<p>It does make sense to use the Roth. You do have to report the portion of withdrawals that are attributed to interest according to Roth rules. Don't know how they work.</p>
<p>wecandothis - I'm pretty sure that it has to be documented income. So unless your daughter is reporting the babysitting money on a schedule C, I'd say that isn't going to work.</p>
<p>calmom yes, documented income so unless the family she sat for did a 1099 this may not work. Also, please remember that the roth would tie up those funds. My kid worked to save money for his college spending money so he wouldn't have to work in college. We didn't get to "shelter" any of those funds but why try to? He used them for what we had planned them for.</p>
<p>well, my son's situation was different. He was out of school and working full time, living on his own & supporting himself, and continues to work half time while he is school -- so for him it was worthwhile to protect some portion of his earnings from being double-assessed as both income + assets by the system. I wouldn't have thought to suggest it to a kid still in high school - its more something that comes up with a kid who is earning a significant amount.</p>
<p>I do think student assets in an IRA do need to be reported on the Profile</p>
<p>Anyone know for sure?</p>
<p>We filled out the Profile last year for our son and in section C, question 16, it asks "IRA, Keogh, 401K, 403b, etc"</p>
<p>the reasoning for putting it in a Roth was to lower EFC; even if it's reported on the Profile, it still may not be assessed in the EFC formula, right?</p>