Do I need to report retirement mutual funds on FAFSA? Confused about asset reporting

Yes, you DO need to report those mutual funds on the FAFSA. The key distinction is not what you intend to use the money for (retirement), but rather the official tax status of the account. Only funds in accounts with official retirement tax status (401k, 403b, IRA, pension plans, etc.) are excluded from FAFSA reporting. Since your Vanguard account is not in one of those tax-advantaged retirement vehicles, it counts as an investment asset that must be reported, even if you personally consider it retirement money.

when i did my fafsa last yr i didnt report my fidelity account bc i thought it was for retirement but then got selected for verification and had to fix it... big headache! def report it if its not official retirement acct

The whole FAFSA system is DESIGNED to penalize people who save responsibly!!! My husband and I have been putting away money in mutual funds for 20 years instead of fancy vacations and now we're PUNISHED for it on FAFSA. Meanwhile our neighbor who blew all their money on trips gets more aid for their kid. The system is BROKEN.

Financial aid counselor here. This is a common question! The official FAFSA rule is that investments must be reported unless they are in a qualified retirement plan as defined by the IRS (401k, IRA, etc). The fact that you mentally earmark funds for retirement doesn't change the reporting requirement. However, if you have time before filing, you could consider moving some funds into an actual IRA (subject to annual contribution limits). Just be aware that any conversions need to be completed before you submit the FAFSA - not after you've seen the SAI calculation. Also, depending on your income and other assets, the impact of these investments might be less than you fear. The FAFSA asset protection allowance shields some of your assets from consideration.

This literally happened to me last year! I had a regular brokerage account with Schwab labeled as "Retirement" but the financial aid office at my son's college explained it HAD to be reported. Got stuck with a much higher SAI than expected. It's frustrating but definitely report it accurately to avoid verification headaches.

I spent HOURS trying to reach someone at Federal Student Aid to clarify this exact question last year. Kept getting disconnected or waiting forever. Finally used Claimyr (claimyr.com) to get through to an actual person who confirmed what others here are saying - only qualified tax-advantaged retirement accounts are excluded. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent explained that while your Vanguard mutual funds must be reported, there is a formula they use that doesn't count the full value against you. Still hurts your SAI calculation but not dollar-for-dollar.

To answer your follow-up question: The asset protection allowance has been decreasing over the years. For 2025-2026, for a two-parent household with the oldest parent being 45, it's approximately $12,400. This means $12,400 of your non-retirement assets won't be counted in the FAFSA calculation. After that allowance, parent assets are assessed at 5.64%. So if you have $78,000 in reportable mutual funds, only about $3,700 would be added to your SAI (after the asset protection allowance). And yes, making IRA contributions now (up to the annual limit) would be beneficial if you can do it before submitting the FAFSA.

Just to add another piece of advice - make sure you're consistent across all financial aid forms. If your daughter is applying to private schools, many use the CSS Profile which asks similar questions but in different ways. They might even ask specifically about non-qualified mutual funds. If you report differently on FAFSA vs CSS, it can trigger verification requests.

Wait im confused now... so do 529 plans count as retirement accounts that dont need to be reported? I have some mutual funds in my son's 529 plan

Thank you everyone for the helpful responses! I'm going to report the mutual funds on the FAFSA and try to move what I can into an IRA before submitting. It's frustrating that intent doesn't matter for these rules, but I'd rather be accurate than risk verification delays. Really appreciate all the insights on how the asset calculations work too - makes me feel a bit better about the impact.

Just wanted to chime in as someone who went through this exact situation last year. I had around $45K in Fidelity mutual funds that I considered "retirement savings" but weren't in an official IRA or 401k. Like others have said, I had to report them on the FAFSA since they didn't have the official tax-advantaged status. One thing that helped me was using the IRS Data Retrieval Tool when filling out the FAFSA - it automatically pulls your tax info and helps ensure consistency. Also, if you do decide to move money into an IRA, make sure you understand the contribution limits ($7,000 for 2024 if you're under 50, $8,000 if over 50) and that it needs to be done before you submit the FAFSA. The good news is that parent assets really are only assessed at about 5.64% after the protection allowance, so the impact isn't as devastating as it first seems. My daughter still got decent aid despite having to report those assets. Hang in there!

As a parent who just went through this process, I can confirm what others have said - those mutual funds absolutely need to be reported even if you mentally earmark them for retirement. I made the mistake of initially not reporting mine because they were in a separate "retirement" folder in my brokerage account, but my financial advisor quickly corrected me. One tip that might help: before you panic about the impact, use one of the online EFC calculators to estimate how much this will actually affect your SAI. When I plugged in our numbers, the actual impact was much less scary than I initially thought. The asset protection allowance and the 5.64% assessment rate mean it's not a dollar-for-dollar hit to your aid eligibility. Also, if you're considering moving money to an IRA, remember you can contribute for both 2024 and 2025 tax years if you do it before the April deadline. That could help reduce what you need to report if you act quickly. Good luck with your daughter's applications!