Potential Financial Aid Trap
While the money inside of a Roth IRA is not counted toward financial aid, withdrawals from a Roth IRA are counted. And those withdrawals can have a big impact.
Most people worry that saving money will hurt their financial aid eligibility, but the reality is that your income will have a much bigger impact. According to SavingforCollege.com, only 2.6% to 5.6% of your savings is counted on the FAFSA while 22% to 47% of your income is counted.
And for financial aid purposes, 100% of withdrawals from a Roth IRA and other retirement accounts count as income, even if the money isn’t taxed as income.
While the money inside of a Roth IRA is not counted toward financial aid, withdrawals from a Roth IRA are counted. And those withdrawals can have a big impact.
Most people worry that saving money will hurt their financial aid eligibility, but the reality is that your income will have a much bigger impact. According to SavingforCollege.com, only 2.6% to 5.6% of your savings is counted on the FAFSA while 22% to 47% of your income is counted.
And for financial aid purposes, 100% of withdrawals from a Roth IRA and other retirement accounts count as income, even if the money isn’t taxed as income.
