We have two kids, one starting college in 2022, the other in 2025 (so seven years of college, total). We make just enough to cover the income portion of our EFC (30K), but not more.
We thus need to use our assets to fund the portion of the EFC they will, themselves, contribute. (Which is fair.) The trick is that we need to do it soon, and we need to do it wisely, because starting in 2020 (our first base year) any assets we sell will appear as capital gains, and thus as income, and will hugely and artificially raise our EFC for the following years if we wait.
What amounts would you sell off and move to 529/retirement/cash, given these assets:
- 300K in SEP IRA (doesn't count, I guess).
- 75K home equity.
- 150K in stock. 15% capital gains to sell (almost 0 basis)
- Investment condo (details* below). 5K net rent. Equity 340K (market value minus loan payoff). Sale proceeds would be 240K after capital gains, depreciation recapture, and realtor.
I am feeling stupid, because I always thought of the condo as a retirement home, and the stock as a 529, but now that I've started to understand how financial aid works, and capital gains, too, I know this was crazily short-sighted, and I'm now looking to correct some missteps.
One additional piece of info is that as a self-employed person I have the capacity to open a solo 401K and contribute to it both as employer and employee. I could use assets to reach my (income-based) maximums of maybe 35K/year for each of 2018, 2019, 2020. And I guess a 529 plan has no max (??)
Thanks so much.