Reducing your income by contributing to a 401K can be helpful on the FAFSA if the reduction will make your child eligible for a pell grant when they might might otherwise not be eligible (or eligible for a larger pell grant if previously your child was only eligible for a minimal one).
However, as several posters mentioned, if your child is applying to a college that uses the CSS, the 401K contributions will still be reported on the CSS and depending on the college, the financial aid office may view those contributions as discretionary income that can be used for tuition instead. But the answer will vary by college and the net price calculators can be useful in guessing. I contribute as much as I can to my 401K. D24 applied to all meet needs CSS profile colleges. However, the actual financial aid packages awarded varied by over 10K. My guess is that part of that difference reflected each individual college’s policy about retirement contributions. At the same time, , I don’t think any of the colleges (even those with the least generous packages) were counting the 401K contributions as fully available for tuition otherwise they would have been asking for an even larger family contribution. So if you can afford to contribute $7000 more to your 401K, I don’t think the colleges will claw all $7000 back. Instead they may see the funds as partially available and the good news is that you will now have more money growing in your retirement account. Again, running the net price calculator under multiple scenarios may give you some idea of what difference the contributions make at different colleges.