Does high % of income deferral effect EFC under CSS/ PROFILE

parentsofsboys
Sat, 10 Nov 2018 00:30:47 +0000

Thanks for the replies:
I do understand that any IRA/401(k) contributions would be added back as income for FAFSA and CSS ie: if we earn $95,000 and contribute $58,000 into retirement accounts, then for tax purposes, our earnings would be $37,000 ($95k - $58k), but for both the FAFSA and CSS our earnings considered available for college would be considered $95,000 since all voluntary retirement contributions would be added back in (unless they were Roth, since Roth contributions are after tax and so would already be included in original earnings calculation).

My concern and question is rather if by voluntarily contributing such a high percentage of income to retirement accounts during base year ($58,000 in contributions on $95,000 earnings) we would be conveying to a FAO that we are able to pay much more than what their particular EFC calculation would normally determine for someone at our earning level - ie: a FAO might logically conclude since we were able to save $58,000 for retirement on $95,000 earnings in base year, we should be able to direct the same amount - $58,000 - to college during the years our sons are in school. An even worse scenario I can imagine is that a FAO concludes that we are in some way gaming the system by hiding income (since most do not live so below their means and happen to have savings to be able to defer such a high percentage of income) or that our priorities are not showing adequately since we are not saving more for college, but are instead saving for retirement/ reducing tax liability. In our situation, we live below our means and have enough savings to contribute at this level to retirement accounts which will save us $10,000/ year in taxes over the next 2-years.

Twoin18 feels my concerns are unfounded which is promising - thank you for taking the time to understanding my question and sharing, Twoin18. However if there are others who have direct knowldge can confirm that our concerns are unfounded, or how we might determine if they are unfounded, we would be most appreciative.

With much appreciation!

parentsofsboys