<p>Hi everyone,</p>
<p>I earned $11,000 in cash this summer + semester, and since my financial aid submission deadline is a few months away, i was wondering if i should deposit it into my bank account.
i was thinking of opening a roth ira and depositing the money there. would that help?
i am just seeking ways to deposit and invest my money without having my school take away all of it.</p>
<p>thanks</p>
<p>Why wouldn't you want to spend your earnings on YOUR college education?</p>
<p>I'm glad that people are deliberately trying to avoid paying for college so the rest of us have to pay more. Sure, you could try to pretend that you're not taking advantage of anyone, you're just "investing in your future" with that Roth IRA, but college should be an even greater investment in your future. If you don't feel it's worth paying for, particularly when you're debating whether you should hide assets, maybe you shouldn't go to college or consider dropping out, if you're already there.</p>
<p>Congrats on your summer earnings.</p>
<p>It's never too early to start an IRA. And since funds in your IRA are sheltered from the financial aid formula, it makes it an even smarter move.</p>
<p>Your need-based aid will be decreased by 20% of your non-sheltered assets each year. So I think it's a smart move. Nothing wrong with it at all.</p>
<p>Noting, also, that the income you received this year will still count as income on the FAFSA-- even though it gets deducted on your taxes, it gets added back in on the FAFSA. But the ASSETS you have on hand the day you complete the FAFSA will be reduced if you contribute to an IRA before applying for aid.</p>
<p>Don't confuse INCOME with ASSETS.</p>
<p>Put it in the IRA.</p>
<p>And don't listen to the holier-than-thou people here. The financial aid system is unfair in many, many ways - for example, people who spend all their money and have little or no assets have an advantage over those who are responsible with their money and save it. You should try to make it work for you. One thing is to deliberately lie, another is to make the most efficient moves you are legally allowed to make. If you don't make all of your assets available for HYPS to take, somebody else won't. After all, in the real world, do people not try to reduce their taxable income? Of course they do.</p>
<p>What bartelby said!</p>
<p>TH518 > Definitely take advantage of the opportunity to invest for your future, as well as pay for college. If you need these funds for college, use them now, otherwise put them where it works to your benefit. Everyone should use the rules and regulations to optimize their own personal situation. Sonofsam and Northstarmom are entitled to their view as well, but suggesting to not legally invest your hard earned dollars is silly. You earned $11K, while 99% of the other students your age did not. Why should you just fork it over? To do so would be equivalent to a URM / recruited athelete / legacy not leveraing their status in admissions because it would be "unfair" to do so. Hogwash! We are governed by rules and regulations Eveyone should follow them, to their maximum advantage.</p>
<p>Do you need this money to pay your college costs? If so, perhaps you can consider using part of it to do so. I would also support using some of it for an IRA and I agree it is never too soon to start one. BUT remember as SBlake pointed out...the money you place in an IRA in 2007 WILL be added back in as income on the finaid forms for the upcoming year. So...that $11,000 will be noted as income on your FAFSA one way or another. BUT if you put it into a regular savings or checking, it will also be noted as an asset. I guess I would say...look at your whole financial picture. If you need this cash to pay your college tuition, then you need the cash to pay your college tuition! You should feel proud that you have this decision to make!!</p>
<p>The assets in a Roth IRA are sheltered from the federal methodology (FASFA), but you should check if any of your schools have a supplemental application that requires assets in a Roth to be disclosed. Also, I think I read somewhere that the CSS profile asks for information concerning student's Roths (not 100% sure)
The great thing about a Roth is that you can always withdraw the money for qualified educational expenses when and if you need it.</p>
<p>Profile schools ask about retirement accounts, of parents and students, but supposedly do not factor them into assessment of need. Thus a modest IRA of the student would not likely effect the need calculation. But you have to wonder, well, then why are they asking?</p>
<p>I believe they DO count the contribution you make so in yr 1, they will count the entire contribution amount (added back into income) but it will not be counted as an asset. During yr 2, this initial contribution amount will not be counted as income or an asset. If you contribute again in yr 2, that contribution amount will be counted back in as income but will not be counted as an asset...</p>
<p>A Roth IRA contribution is not deducted from income, so it is not "added back" either -- that only applies to regular IRA's that reduce the AGI. </p>
<p>tomahawk518 will have to report the $11,000 INCOME in the year it was received and it will increase his EFC.</p>
<p>There is a limit to how much he can put into a Roth IRA -- I believe $4000. </p>
<p>The FAFSA and CSS Profile will double-count income and assets -- that is, if tomahawk spends $2000 on expenses, puts $4000 in an IRA and is left with $5000 in the bank in January when he does his FAFSA, then he will have $11,000 of income as well as $5000 in assets, which will dramatically increase his EFC. There is no allowance for expenses -- it is very possible that the combined effect of counting assets + income can leave a student with a total EFC in excess of remaining assets -- so there really is nothing wrong in sheltering the assets in a way that is fully transparent to the colleges. As long as the $11k income is reported, tomahawk is free to spend or invest the rest in whatever way he chooses.</p>
<p>This really is no different than if he decided he needed a car or a computer and spent some of his money on those items. The money would no longer be available for college, but most people would recognize that cars & computers are sometimes necessary purchases for students. It's simply a smarter choice to invest the money in the Roth IRA.</p>
<p>I'm doing my best to continue to fund my retirement accounts while my daughter is in college, and as I cannot do that fully out of current income, I am doing it by transferring funds from a regular investment account into the IRA. I'm in my 50's and I am sure that no one would think that I am trying to cheat the colleges in any way, even though each year I am sheltering a little bit more money from future consideration. But heck, I'm not getting any younger. </p>
<p>Which leads me to another point - in response to dt123's question about why CSS Profile colleges ask for the info: they say that they may protect more of the family's assets from consideration if they see the retirement account is inadequately funded. Perhaps this might be a factor they would consider in deciding whether to cap consideration of home equity or not. </p>
<p>I don't know whether that is true or not -- but the point is that it is certainly a legitimate thing to do with the funds.</p>