Thank you for pointing out about FAFSA, I was not aware and did read a bit now.Take a student loan first and then use the Roth contribution to pay it off later. Then, it will not impact FAFSA.At least before the big FASFA rework, roth contribution withdrawals could count towards income for your future FASFA years. That could negatively impact your future aid. I'm not sure if that is still the case.Is it not a popular option to withdraw from your own Roth IRA funds for kids college education, when the need arises ? This way you do not have the risk of overbudgeting for the 529 ?
Your own contributions are all withdrawable from Roth IRA without tax/penalty even if you are under 59 1/2.
Especially if you have the option to do mega backdoor roth IRA while you are relatively young, then there is not even the 6K per year contribution limit to Roth IRA.
KlangFool
It appears the impact on FAFSA is when it is a Roth IRA in the name of the student itself, right ?
I was thinking of rather using my own (i.e., parent's) Roth IRA. That should have no impact on FAFSA , from what I am reading, e.g., here
https://www.appily.com/guidance/article ... 20amount.
"Another possibility is to save for college in a parent’s or grandparent’s Roth IRA. Parents can use Roth IRA distributions to pay for college, especially if they are age 59-1/2 or older. But, given that there are limits to the amounts that can be saved for retirement using a Roth IRA, this is not a good idea if the parent does not also have money in a 401(k) or other retirement plan. Parents should not sacrifice retirement savings for their children’s college education."
Only concern with using parent's Roth IRA seems to be how much you can save in it. Like I said, if you have access to mega backdoor Roth from young age, even this concern is not all that relevant.
Thoughts ?
Statistics: Posted by esipsi — Wed Mar 06, 2024 2:23 am — Replies 35 — Views 2813
