I purchased stock in my company, but according to the purchase agreement I only would receive about 1/3 of the stock’s value if I sell them back to the company before the age of 60. I’m 48, with kids in college from 2021 - 2027, so selling these stocks to pay for college really isn’t an option. Because this investment isn’t really intended for college, it seems counter-intuitive to have it factor into FAFSA/EFC. Do I need to list it in FAFSA? Obviously, if I do, I’m only listing the percent I’d be able to get in cash if I sold early. Really, it basically acts as a retirement plan with a 67% penalty on early withdrawal. Thoughts?
Yes. Reporting on FAFSA only those investments that are “intended” for college is not the way it works. Report the present value of any investments, unless the FAFSA instructions specifically state not to do so (e.g., qualified retirement accounts such as an IRA, 401(k), 403(b), etc.).
You may think it’s a retirement plan with a heavy penalty- but I’d bet that for the comp experts who designed the plan, it’s a retention plan and “it is what it is” in terms of the penalty. It’s designed to keep you employed there, because years worth of behavioral economic research has shown that people fear a loss more than they can properly value a gain. So you get an offer from another company— your first thought is what you are leaving on the table, not what the upside might be in selling your shares vs. what they were worth when you bought them.
If this were a retirement plan, your shares would be held in a 401K…
Blossom, you’re definitely correct its for retention. I’ll look up my current stock value and get our FAFSA filed.