3 Ways To Help Your Student Qualify For More Financial Aid

May 18, 2016

For parents with their eldest child just finishing their freshman year of high school, the end of the school year may not trigger thoughts of paying for college yet. After all, you’re more likely dealing with helping your child find a summer job or even more daunting – teaching them how to drive. However, for parents who may have large non-retirement savings that could have the effect of reducing their child’s financial aid package, the time to act is now.

The Free Application for Federal Student Aid, or the FAFSA, is completed using income tax information from two years BEFORE your student graduates (called the “base year”), which starts with the second half of your student’s sophomore year. In other words, parents of the Class of 2019 or later: there’s still time to protect some of your savings from being considered in the federal aid package. Here’s how:

1. Max out your retirement savings. Any money you contribute to your 401(k), 403(b), IRA, etc. during the base year is added back to your income for financial aid purposes, but if you can afford it, try to front load your retirement savings in the years leading up to it in case you have to dial it back in order to pay for college. Max out your 401(k) and even consider funding a non-deductible or “back door” Roth IRA. In other words, get used to living on less while turbo-charging retirement.

2. Transfer savings in your kid’s name into a 529 account. Savings held in your child’s name are counted at a higher rate on the FAFSA than funds held in a 529 plan, even if the 529 is in the name of your student. If your child is definitely headed to college and has money in a custodial account or their own name, consider transferring any amounts that would be used to pay for schooling anyway into a 529.

There are a couple caveats to this though. Keep in mind that earnings on money in a 529 that is withdrawn for anything besides qualified education expenses is taxable plus a 10% penalty, so it’s not a place to shield savings for the future. Only shift money that you will actually pay toward tuition. Second, 529 plans have fees associated with them, so make sure you evaluate that as part of this decision. We really like savingforcollege.com as a resource in comparing plans and options.

3. Use savings to pay down your mortgage. If you have non-retirement savings that don’t have a specific purpose other than long-term savings, you might want to use some of that to pay down your mortgage to reduce the Expected Family Contribution. Some schools will ask for the amount of equity in your home when evaluating institutional aid, but for federal purposes, it doesn’t count.

Granted, these moves probably won’t be the difference between qualifying for need-based aid or none at all. But if you don’t wish to use a large portion of your savings for college bills or if you’re prioritizing retirement savings over education funding (a good priority), these moves can help increase the amount of federal loans that your child is offered, even if you opt not to take them. After all, every penny counts.

Retirement Saving Benchmarks for All Ages

February 03, 2014

How did your team do in the Super Bowl? If you are a Seattle Seahawks fan (or at least pretended to be last night) the final scoreboard doesn’t tell a lie and your team was victorious in Super Bowl XLVIII (that’s 48 if you’re a bit rusty on the understanding of Roman numerals). Continue reading “Retirement Saving Benchmarks for All Ages”

Rules That Are Meant to Be Broken

May 10, 2013

It looks like the FAA may relax the rules on what types of electronic devices you can use while the plane is zooming down the runway about to take off. I’m not sure it would have helped Alec Baldwin continue to play Words With Friends a little bit longer and avoid that confrontation, but it might make a lot of people (including me) happy. I’m a big fan of reading and my favorite thing to do on flights is to read. And lately I’ve been reading more on my iPad, using the Kindle app and my local library’s e-reader checkout program.(Bonus tip: For those of you who love to read, check out this link to Overdrive, which is the program I use to check books out of my local public library for free rather than buying the book via digital download. It’s a great money saver!) Sometimes, there are rules that need to be updated in order to keep up with the changing world. Here are a couple of rules with your financial life that you might want to consider updating. Continue reading “Rules That Are Meant to Be Broken”

With the Election Over, Now Really Ask Yourself If You Are Better Off Than You Were Four Years Ago

November 26, 2012

Are you better off than you were four years ago? Now that the election is over, it is not a question loaded with political implications so you can actually take some time to think about your answer. It is actually a very important question and here is another one, where are you headed four years from now? Most people, unless they work in politics, don’t anchor their life on four year increments but you could — it may actually be very useful financially to do so. Continue reading “With the Election Over, Now Really Ask Yourself If You Are Better Off Than You Were Four Years Ago”

How Much Should Employees Have Saved Up For Retirement So Far?

October 09, 2012

I’ve just come off of a 3 week road trip, where I zig-zagged across the western half of the U.S., speaking to a variety of workforces on planning for retirement. One common question I heard again and again from many of the mid-career employees was “how much should I have saved up so far?” towards their retirement nest egg. Similar to my journey as I traveled from one workplace location to another, I knew what the final destination was on the map, but it was just as important to know how many miles I had driven and how many more miles to go, so I would know when I had to stop for gas or take a pit stop. Continue reading “How Much Should Employees Have Saved Up For Retirement So Far?”

The Proposed Retirement Security Project: Could Retirement Plan Deductions Get Cut?

May 01, 2012

A recent tax reform proposal may bring the end to the cherished tax shelter of a retirement plan deduction. During testimony to the U.S. Senate Committee on Finance last September, William Gale discussed a proposal to eliminate the current tax deduction on retirement savings plans and suggested replacing it with a flat-rate refundable credit that would be deposited directly into the saver’s account. Gale, who is the Director of the Retirement Security Project at the Brookings Institution, wants to see a new incentive structure for contributions to retirement savings accounts by changing the treatment of retirement savings in three ways: Continue reading “The Proposed Retirement Security Project: Could Retirement Plan Deductions Get Cut?”

Five Money Moves to Make When a Recurring Payment Ends

March 05, 2012

My youngest son is graduating from college this spring — I can’t tell you how excited I am. Not only as a proud mother who gets to see her son accomplish a goal that is important to him and that he has worked very hard for, but because soon I will be free! I’ll be free from paying tuition and room and board! His tuition at the University of California has nearly doubled in four years so my husband and I have been paying out of pocket for his expenses each month. We are feeling the same way many people feel when they are close to paying off a car, their house or any other recurring bill — very excited AND since he is the last one, this is a bill that won’t be coming back. Continue reading “Five Money Moves to Make When a Recurring Payment Ends”

Imagine Your Worst Case

February 17, 2012

Over the last few months, I’ve had the opportunity to learn a whole lot more than I ever knew about some “behind the scenes” things that happen before a soldier gets deployed overseas. My girlfriend works as part of a dental team that goes to military bases on weekends and performs dental work on a ridiculously large number of soldiers prior to their deployment. On a normal day in a normal private practice, she may see 8-10 patients. Continue reading “Imagine Your Worst Case”

The 12 “Financial” Days of Christmas

November 30, 2011

In the spirit of yuletide caroling, allow me to introduce a new song for the holidays.

^♪On the first day of Christmas my true love gave to me… one extra annual payment on my mortgage. Continue reading “The 12 “Financial” Days of Christmas”

The Truth About Target Date Funds

November 11, 2011

I read this article on Bankrate.com about investors’ belief that target date funds come with a guarantee of a sufficient retirement income. The statistics are a little bit startling (51 percent — of people investing their retirement savings in target-date funds see them as a retirement planning panacea and think that putting their money in them guarantees their retirement income needs will be met), frightening even, from the perspective of a financial planner. The conclusion of the article is: Continue reading “The Truth About Target Date Funds”

What Will it Cost if You Delay Saving for Retirement?

May 26, 2011

The other day, I have to confess, I was in a very sour mood as I just found out my flight had been delayed (that never happens right?) and I was not going to be home for THREE HOURS. Why did this bug me so much? My wife and I were scheduled to look at some homes as we are still in limbo relocating from California to Chicago. So this three hour delay cost me the ability to view some possible locations and extended our time horizon of not having a home by at least another week. The only redeeming factor here is that this delay was out of my control. Continue reading “What Will it Cost if You Delay Saving for Retirement?”

Financial Education: 3 Important Check Ups to Do in an Hour

January 10, 2011

There are 8760 hours in a year – 730 in a month with about 240 of them spent sleeping. That leaves about 490 hours to do what we want. We spend quite a few of those at work and it probably seems like we spend the rest of them waiting in line or being on hold. We can put a few of those hours to good use with some actions that might not be very urgent but are very important none the less. Here are a couple of important insurance check-ups to do this week that take about an hour each. Continue reading “Financial Education: 3 Important Check Ups to Do in an Hour”

“Behavioral Judo” – Don’t Stop at the Minimum Auto-enrollment

November 15, 2010

I never practiced Judo but I’ve been on the receiving end where I said, “What just happened here? Why am I flat on my back on the mat?” That is what happens when you are the mother of three boys! Judo practitioners use the opponent’s motion to keep them going in the direction they are going and in the case, take them down to win a match. Continue reading ““Behavioral Judo” – Don’t Stop at the Minimum Auto-enrollment”