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How will your investments affect your child’s financial aid prospects?

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POSTED February 10, 2014 7:32 p.m.

It’s only February, but college financial aid officers are already preparing for the upcoming school year. If you have young children, how will your own savings and investments affect their chances of eventually getting financial aid?

In determining aid packages, most colleges rely on the Free Application for Federal Student Aid, or FAFSA. When filling out your FAFSA, you don’t have to report your IRA and 401(k)as assets, but if you take withdrawals from them while your child is in college, the income will count against your child’s financial aid package.

If you invest in a 529 plan, you will need to report it on FAFSA — but withdrawals themselves won’t be counted as income, they will be free of federal taxes, provided you use the money for higher education. (If you use the money for other purposes, you’ll be taxed and potentially penalized for 10% on the earnings.)

Even with careful planning, your student may not qualify for financial aid, so consider all college-funding strategies. However, don’t neglect your own investments for retirement-because that’s an important goal, too.

There’s No Time Like Now to Plan Your Future. Contact me at 209-824-1000 to Schedule a Free Portfolio Review.


This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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