Do Retirement Accounts Count as Assets for FAFSA?
Understand how your financial assets are assessed for FAFSA, ensuring you accurately report savings for college aid eligibility.
The Free Application for Federal Student Aid (FAFSA) is the primary application for students seeking federal financial assistance for college. Understanding how financial assets influence aid eligibility is important. The FAFSA assesses financial capacity to determine eligibility for grants, scholarships, work-study programs, and federal student loans.
Retirement Accounts and FAFSA Asset Assessment
Most qualified retirement accounts are not considered assets when determining federal financial aid eligibility through the FAFSA. This exclusion applies to a wide range of common retirement savings vehicles, including Traditional and Roth IRAs. Employer-sponsored plans like 401(k)s, 403(b)s, and 457 plans are also excluded from FAFSA asset calculations.
Additional excluded retirement account types are SEP IRAs, SIMPLE IRAs, and various pension plans. These accounts are excluded because they are intended for long-term retirement savings. While balances in these accounts do not count as assets, untaxed contributions or withdrawals may need to be reported as income on the FAFSA in certain circumstances.
Other Assets Considered for FAFSA
Several other types of assets are included in the FAFSA’s assessment of financial capacity. Funds held in cash, savings accounts, and checking accounts are counted as assets. Investments such as stocks, bonds, mutual funds, and certificates of deposit (CDs) are also reportable assets. Money market accounts and trust funds are considered countable investments.
Educational savings plans like 529 college savings plans and Coverdell Education Savings Accounts (ESAs) are counted as parent assets if owned by the parent for a dependent student. The equity in a primary residence is not counted as an asset for FAFSA purposes. However, other real estate, such as rental properties, vacation homes, or investment properties, is included. Certain business assets may also be counted, though specific rules apply for smaller, family-owned businesses.
Reporting Assets on the FAFSA
When completing the FAFSA, asset information should reflect values as of the day the application is filed. The FAFSA form includes specific sections for reporting both student and parent assets. Accurately report the current market value of all countable assets in these designated sections.
The value of qualified retirement accounts should not be reported in the asset sections of the FAFSA. Applicants should skip or leave blank fields pertaining to these excluded retirement assets. The FAFSA assesses the “net worth” of assets, calculated as the value of the asset minus any debts owed against it, for reportable items like real estate or businesses.