<p>A family's EFC is based upon their annual earnings (and investments etc.). Is the EFC based upon taxable earnings or pre-deduction earnings? Would starting or maximizing a 401K or 403B plan lower a parent's EFC for a child? Any input would be appreciated.</p>
<p>Money in a retirement account is not reported as an asset on FAFSA. But money contributed in the tax year being reported does not reduce the income used or FAFSA. You report the AGI on FAFSA but any pretax contributions to retirement accounts in that year are added back to the AGI in the EFC formula.</p>
<p>yup, it’s a wash for the year, but if you don’t put the money into a retirement account and you don’t spend it (ie, it’s sitting in a bank), it could get assessed again as an asset if you are over the protection limit.</p>
<p>thanks Uncle sam!</p>
<p>What about for non-FAFSA?</p>
<p>Profile works the same way AND they ask the total amount you have in retirement accounts. I suppose each college has their own policy of how they deal with retirement assets.</p>