<p>Does it matter if your investments are specifically in an IRA as opposed to just a CD as far as the calculation of your EFC and also how will the CSS treat this? I thought about moving money into an IRA but I don't know the affect it will have on my son's financial aid for 2006-2007. I know the income is added back in but I am confused as to the treatment of the account itself. Are IRA's looked at differently than CD's ? Right now we do not have an IRA at all. Should I shift this money?</p>
<p>CDs are considered liquid assets and they are reported in the section dealing with savings, etc. Retirement account BALANCES are not reported on the FAFSA at all. The contributions you made in the previous year to retirement accounts ARE reported. In some cases, folks have to report the retirement account value on supplemental questions on the Profile for certain colleges.</p>
<p>An IRA is a type of account that has special tax treatment (varies for traditional or Roth). A 401(k) also enjoys favorable tax treatment. These contrast with a regular "taxable" account.</p>
<p>A CD is a type of investment, along with stocks, bonds, mutual funds, real estate, etc., all of which are acceptable investments within an IRA, 401(k) or a regular taxable account.</p>
<p>The point is that you could invest in a CD within an IRA or a regular account. How the schools look at the CD for purposes of determining financial aid will vary depending on the type of account in which it's housed (you seem to have been asking about a standalone CD, which most likely would be fully taxable).</p>
<p>If you're applying for financial aid now, this may all be moot since, as thumper1 points out, schools will look at current contributions to IRAs.</p>
<p>For those parents planning well ahead, however, consider fully funding IRAs and 401(k)s before "college funds." Fewer assets in "taxable accounts" will reduce your EFC.</p>
<p>It boils down to this. There is assistance for college available in the form of financial aid and scholarships. Other than social security (which will be limited at best), outside assistance for retirement isn't likely.</p>
<p>We received a capital gains for some stock in a mandatory buyout. Of course , last year I included it in our investments portion of the FAFSA and CSS. So I wondered if instead of just buying another CD which puts it back in our investment ,we would be better off opening an IRA ( Roth or regular? ) account with this extra money. Will this help us shelter this one time gain at all ? </p>
<p>One other thing what about inherited money form a parent? If this happens while your child is in college is there any way to shelter it a little bit?</p>