Ask Terry Questions minor child starting a Roth IRA and how that may impact college financing

minor child starting a Roth IRA and how that may impact college financing

By Terry Savage on June 17, 2024 | College Savings / Student Loans

Hi Terry, for starters thanks for all the advice in the last few years. Because of you we have been able to take advantage of the I Bonds and now we are into TBills. Always listen on WGN for you or if I miss you I’ll listen to the podcast.
So my wife and I have 2 daughters in high school (age 16 and 17, one is hers from previous marriage and one is mine from a previous marriage, if that matters) both have summer jobs and work during the school year, both want to invest their money. I think you would recommend a Roth IRA (one that mirrors the S&P index) , correct me if you wouldn’t. My concern is how it may affect college loans, grants, or tuition assistance.
A little background on our financial situation, we have combined income of over $300,000 per year and a considerable amount of money in savings and investments. Both have a 529’s but not very much.

Terry Says

Student assets, even UGMA accounts, weigh far more heavily in the aid formula when it comes to financial aid. But interestingly, Roth IRAs (parental or student) are NOT counted.  So if you can stash some of their earnings in a Roth, it’s a good long-term idea. However, if they withdraw anything from the Roth (even after tax contributions) it is ALL considered student income, which weighs even more heavily against the family in seeking aid.  So a Roth means the money is really stashed away!

Read this:’s%20Roth%20IRA%20for%20College%20Savings&text=Assuming%20a%20realistic%20annual%20return,Federal%20Student%20Aid%20(FAFSA).





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