Excluding Real Estate Equity for EFC Calculation

blossom
Tue, 20 Dec 2022 20:28:57 +0000

For other folks reading this thread whose kids are younger…

Max out on your 401K, IRA or whatever is available to you given your employment status before you do anything else “for retirement”. There is one reason why I recommend that to everyone- even to folks who like to argue with me that they can get much better returns elsewhere.

And that’s because with every change in the tax code, every shift in the estate tax asset shield, every proposed change to retirement funding…somehow, the 401K/IRA lobbying crowd manages to get anything punitive dropped.

There is ample evidence that unlike stuff that only benefits “rich people” (excluding 20 million or 25 million in assets from federal estate taxes-- who cares?) the 401K/IRA crowd is “regular people”. And they still have enormous clout just because there are so many of them (of us). And I don’t predict that changing, regardless of what happens to federal student loan forgiveness, SALT, AMT, or anything else that could be on the table down the road.

Sure, accelerate the rate at which an inherited IRA has to be paid down. But eliminate the ability to pass on an IRA to your heirs? No. I cannot see anyone with an appetite to make that happen, even the most aggressive “tax the rich” legislators.

There’s more to retirement planning than just rate of return. You have to factor in the possibility that the rules will change AFTER you’ve funded something but BEFORE you’re collecting. But the 401K folks are numerous and noisy and I predict that those funds will be protected from legislative changes for a very long time.

Financial Aid? A side benefit. But you want your retirement funds where you think they are when you need them.

Real Estate- unfortunately for the OP, middle class people view real estate as the province of the wealthy (other than a primary home). So while there are lots and lots of tax breaks for developers, REITS, and the high end part of the industry, there isn’t a hue and cry when there’s a change in the tax code which penalizes small landlords, owners of a weekend home, etc. And financial aid- designed for the “typical” family with “typical” assets which means a house (or not, many middle class families do not own homes), an emergency fund in the bank, and maybe a money market account/IBM stock.