<p>Is it true that families are not penalized for having larger retirement plan balances? I saw on one of the other threads a worksheet about retiremnet plans and professional adjustments by financial aid officers.
It says that the CSS Profile inquires about these assets.
If we would otherwise qualify for some financial aid because of lower income due to the economy , could high retirement plan assets ruin it?</p>
<p>The FAFSA does not take into account the money that you already have in retirement plans such as an IRA, 401(k), etc. The money that you make each year that you put into that account is considered to be part of your income for that particular year, but once it is in the account it is not considered to be available in subsequent years.</p>
<p>Some colleges/universities that use the CSS Profile will consider that the money in those accounts is available. However, not all of them do. If a student applies to institutions that require the CSS Profile, and the parents want to protect their retirement funds, the family needs to find out which factors those particular institutions take into account.</p>
<p>You also need to remember that most institutions are not wealthy enough to provide massive amounts of need-based aid. There is every chance that a student will have a gap between the aid offered by the college/university and the family EFC. If financial aid is important in your case, the student should look for institutions that have records of being generous to students with his/her profile. If a wide enough net can be cast, in April he/she will be able to compare the aid packages and make a choice that is affordable for the family.</p>
<p>Retirement accounts held by a parent in an IRA, etc. are generally not considered in financial aid. The form asks for information about retirement accounts to make sure they are separated from all other investments, and to find out if someone has a fortune hidden away in them. </p>
<p>I can imagine a scenario where someone has a couple million in retirement accounts, and the college says you don’t need our limited aid, because you have excess money stashed away. </p>
<p>Money that you put into an IRA in the current year is considered to be income because that is considered a discretionary decision.</p>
<p>Thanks. Would $500-600k in retirement plans likely be enough to reduce a FA estimate that was provided? The school requires both FAFSA and the CSS Profile, but FA is based on AGI, # of kids in college and non-retirement assets.</p>