<p>If a student opens IRA account, we are wondering what impact it may have on the financial aids. Thanks.</p>
<p>I think any contributions for the previous year is included as income. The belief is that contributions to retirement at this time is optional.</p>
<p>Since most schools don’t meet need, it may hurt the student in the long run to do this. He may need to money to pay for college.</p>
<p>Any contributions are added back into income in the year that those were earned. After that, the money in the IRA (or other retirement account) is not considered to be an investment available for college expenses with the FAFSA formula. However, some of the CSS Profile institutions will consider money in a retirement account to be available for college expenses.</p>
<p>Personally, I think it is great if students can put a bit aside each year in an IRA - even if it is just a couple hundred dollars. This helps them form the habit of saving for the long-term.</p>
<p>Money in an IRA can be taken out to pay for college without incurring a penalty. It is a great place for kids to save their money. Both of my kids have IRAs.</p>
<p>For FAFSA purposes, it will not increase the EFC as an asset. But as Happymom says, with Profile schools, they can take it into consideration. They can take anything into consideration, and many admit they do, though certain basic guidlelines like not considering retirement accounts are usually taken. But large amounts in such situation may be looked upon as potential money sources.</p>