I am filling out the FAFSA and am not sure about one of the questions.
For this FAFSA question: “Payments to tax-deferred pension and retirement savings plans (paid directly or withheld from earnings), including, but not limited to, amounts reported on the W-2 Form in Boxes 12a through 12d, codes D, E, F, G, H, and S. Don’t include amounts reported in code DD (employer contributions toward employee health benefits).”
Should we include all money contributions we put in our Roth IRA? Just wondering because it says “tax-deferred” and Roths are not tax-deferred. But it seems like they are trying to get all info about money going into retirement plans, so I don’t know where else we would enter the money we have put in our Roth in 2020.
Your Roth IRA is already included as part of your income. You don’t add put that in with the tax deferred ones. The tax deferred ones reduce your taxable income. Roth contributions don’t.
@BelknapPoint can probably clarify this and explain it better than I did.
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thumper is right. Any money contributed to a Roth IRA that came from income during the reporting year has generally already been included in AGI and therefore shows up on FAFSA.
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Thank you for the quick answer. What about capital gains and dividends that are reinvested and just stay in a tax-deferred traditional IRA? Do I need to report that as “payments” to a tax-deferred retirement account, since it’s sort of like income?
No. Reinvested capital gains and dividends in a traditional IRA are not considered income (and taxed) until they are withdrawn (hopefully in retirement).
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Tiptoe, your post demonstrates how important it is to have retirement funds put into an actual retirement account. We see LOTS of parent posts on CC where they’ve got money “set aside” for their retirement, and then they’re shocked that those funds are considered available for paying for college.
YOU may think that half a million dollars in a brokerage account is for your “retirement”. But it’s not, it’s just a brokerage account.
Thank you for pointing out what should be obvious- but rarely is- retirement savings belong in a retirement plan- IRA, 401k, 403b. If you max out on those- then you’re in great shape, and there are strategies for dealing with that down the road. But people who are not currently contributing to a retirement plan are not doing themselves a favor when it comes to financial aid (or their well being in retirement, for that matter).
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