Using Roth IRA to hide savings from FAFSA? Need strategy with twins starting college

thx for this breakdown! my cousin tried somethign similar last yr and got confused with the rules. ended up getting flagged for verification and had a NIGHTMARE trying to explain everything. not worth the hastle imo

Thanks for explaining - that makes sense about the contribution limits. We're within the income threshold to contribute, but you're right that moving significant amounts quickly isn't possible. Do you know if 529 accounts are counted differently than regular savings on the FAFSA? We have some money there too but wasn't sure if that was any better than regular savings accounts.

529 plans owned by parents ARE counted as parental assets on FAFSA, but at a much lower assessment rate than student assets (only about 5.64% of parent assets count toward your SAI vs 20% for student assets). So while they don't avoid FAFSA calculations entirely like retirement accounts, they're definitely better than keeping education savings in a student's name. One thing nobody's mentioned: the 2024-2025 FAFSA eliminated the "sibling discount" that used to automatically lower your SAI when multiple kids were in college. This is a HUGE issue for families with twins or kids close in age. You should definitely run the numbers through the Federal Student Aid Estimator tool to see where you stand.

Yes, that's a legitimate strategy. The FAFSA doesn't count your primary residence as an asset. Some families do choose to pay down their mortgage with savings to reduce their countable assets. However, this is essentially converting liquid assets (cash) into illiquid assets (home equity), which means you're losing access to those funds for other needs. Before making drastic financial moves, consider that only about 5.64% of parental assets are counted in the SAI calculation. So having $50,000 in savings only adds about $2,820 to your expected contribution. Sometimes maintaining financial flexibility is worth the modest increase in SAI.

that makes so much sense, thankyou!! i was scared of doing something wrong and getting in trouble

This happened to my neighbor too! FAFSA verification is no joke these days. The financial aid offices have been cracking down on what they call "strategic asset relocation" before filing. They compare bank statements and if they see large unusual transfers right before FAFSA filing, they absolutely can (and often do) question it. If anyone's having trouble getting answers from the Federal Student Aid help line about verification issues (which is SUPER common), I'd suggest trying Claimyr (claimyr.com). They got me through to a real FSA agent in under 15 minutes when I was dealing with a verification nightmare last month. They have a video demo showing how it works: https://youtu.be/TbC8dZQWYNQ - saved me days of frustration.

Wish I'd known about that service when we were going through verification hell! Spent 3 weeks trying to get someone from FSA on the phone to explain what documentation they needed.

Good point about CSS Profile! Both kids have a few private schools on their list, so we'll need to look into that too. I'll definitely mention the twin situation directly to the financial aid offices. Do you think it's better to call or email about that kind of situation?

ALWAYS CALL!!! emails get ignored or generic responses. My daughter got an extra $8500 in grants just because I called and explained our twins situation in 2022. The squeaky wheel gets the financial aid!!!

That sounds like a very solid, balanced approach. You're making smart moves within the rules without doing anything that could trigger verification issues. The twin scholarship is a fantastic find! One last tip: Once you get your SAI from FAFSA, if it seems too high based on your actual ability to pay, you can submit a Professional Judgment request (sometimes called a Special Circumstances form) to individual schools. This is especially helpful if your income in 2023 was unusually high compared to 2024, or if you have exceptional expenses not captured on FAFSA.

Thanks for the Professional Judgment tip! I'll keep that in mind once we get our SAI. Really appreciate all the help from everyone.

This is such helpful advice, especially the point about applying to different schools initially! I hadn't considered that strategy at all. The work-study suggestion is great too - we'll definitely have them look into those programs early. Quick question about the American Opportunity Tax Credit - can we claim it for both twins in the same year if they're both in college? And does it matter if we're using 529 funds or other sources to pay for their expenses? Thanks for sharing your experience - it's really reassuring to hear from someone who's been through this exact situation!

Yes, you can absolutely claim the American Opportunity Tax Credit for both twins in the same year! It's per student, so that's potentially $5,000 in tax credits total. And yes, you can use it even if you're paying with 529 funds - just make sure you're not "double-dipping" by using the same expenses for both the tax credit and tax-free 529 withdrawals. The key is coordination: use 529 money for room/board and other qualified expenses, then pay tuition/fees out of pocket to maximize the tax credit. Your tax preparer can help optimize this, but it's definitely worth the extra planning! The different schools strategy really worked for us - one twin got significantly more merit aid when the school thought they were the "only" kid we were sending to college that year. Sometimes these institutional aid formulas work in weird ways.

This is incredibly helpful coming from someone who works in financial aid! I'm definitely taking note of that October 1st filing date - I had no idea it opened that early. The point about Early Decision timing is really smart too, since we're still figuring out application strategies for both kids. Quick question about the state aid programs you mentioned - is there a good centralized resource to find these, or do I need to check with each state's education department individually? We're in Colorado if that helps with any specific suggestions. Also, thank you for emphasizing the transparency point. After reading about other families getting flagged for verification, I want to make sure we do everything above board. Better to get a slightly higher SAI than deal with verification complications!

For Colorado specifically, you'll want to check out the Colorado Department of Higher Education website - they have several programs including the Colorado Opportunity Fund and various need-based grants that might apply to your twins situation. The College Assist website (CollegeAssist.org) is also a great Colorado-specific resource that lists all available state aid programs in one place. For a broader search across states (in case your twins are considering out-of-state schools), NASSGAP (National Association of State Student Grant and Aid Programs) has a good database, though it can be a bit clunky to navigate. You're absolutely making the right call on transparency! I've seen too many families create unnecessary stress for themselves trying to "game" the system. The verification process has gotten much more thorough in recent years, and it's just not worth the risk. Your straightforward approach will serve you well.

This is such great advice about the timing! I'm definitely going to look into whether we qualify for catch-up contributions - my spouse just turned 50 last month, so that could be an extra $1,000 we can contribute for 2025. The point about contributing for the 2024 tax year until April 2025 is really smart too, especially since we'll probably file FAFSA in January. I'm curious about your experience with the financial planner - did you find one who specializes specifically in college funding, or just a general financial planner who was knowledgeable about FAFSA? We've been thinking about getting professional help but weren't sure what type of advisor would be most helpful for our situation. Also, have you run into any complications with your state's 529 plan and the Roth IRA strategy working together? We have money in both and want to make sure we're coordinating everything properly.

We found a fee-only financial planner who specifically advertises college funding expertise - it made a huge difference! They knew all the FAFSA nuances and helped us model different scenarios. Look for CFP (Certified Financial Planner) designation and ask specifically about their experience with education planning. Regarding 529 vs Roth coordination - our planner helped us create a "withdrawal strategy" that maximizes tax benefits. The key is using 529 funds first for qualified expenses while keeping Roth contributions available as a backup. Since 529 withdrawals for education are tax-free but Roth contributions can be withdrawn penalty-free for any reason, it gives you more flexibility. One thing to watch out for: if you withdraw Roth contributions for education expenses, you lose that contribution space forever (unlike 529 plans where you can potentially recontribute in some cases). So we're treating Roth as truly the last resort option, even though it helps with FAFSA calculations. The planner's fee was about $2,000 for the comprehensive college funding plan, but it's already saved us more than that in optimized strategies. Definitely worth considering!

This thread has been incredibly helpful! As a newcomer to the college funding world (my twins are sophomores), I'm trying to wrap my head around all these strategies. The timing aspect you mentioned about Roth contributions is really eye-opening - I had no idea you could contribute for the previous tax year up until April. Quick question about the financial planner route - when you say they charged $2,000 for a comprehensive plan, was that a one-time fee or do you have ongoing meetings with them? I'm wondering if it's worth getting help now while we still have two years to implement strategies, or if we should wait until closer to college application time. Also, for those of us just starting to think about this - is there a particular order we should tackle these strategies? Like, should we max out 529 contributions first, then focus on Roth IRAs, or does it depend on individual circumstances? Thanks for sharing your experience - it's really helpful to hear from families who are a step ahead in this process!

Great question about timing! We actually started working with our planner when our twins were sophomores too, so you're at the perfect stage. The $2,000 was a one-time comprehensive planning fee, but we do have optional check-ins twice a year for $300 each (totally worth it for course corrections). Starting early like you are is definitely the smart move! Here's the general priority order our planner recommended: 1. Max out any employer 401k match first (free money!) 2. Build your emergency fund to 6+ months expenses 3. Then it depends on your income/tax situation - if you're in a high tax bracket, traditional IRA contributions might make more sense than Roth for FAFSA purposes 4. 529 contributions come next, but balance them with retirement savings since you can't borrow for retirement 5. Roth IRA contributions for the FAFSA benefit (if income allows) The key insight our planner shared: don't sacrifice YOUR retirement security for college costs. There are loans for college, but no loans for retirement! With two years to plan, you have time to implement these strategies gradually rather than making dramatic moves right before FAFSA filing. That's exactly what we did and it's made the whole process much less stressful.

This is exactly the kind of comprehensive planning approach I wish I had known about earlier! The priority order you outlined makes so much sense - especially the point about not sacrificing retirement security for college costs. That's something I keep forgetting in all the college funding stress. I'm definitely going to look into finding a CFP with college funding expertise now. The twice-yearly check-ins sound really valuable too, especially as financial situations and college plans can change so much during high school years. One follow-up question about the traditional vs Roth IRA decision you mentioned - how does the tax bracket consideration work with FAFSA planning? I understand traditional IRA contributions reduce current taxable income, but do they impact FAFSA calculations differently than Roth contributions? We're probably in that middle-income zone where every FAFSA strategy counts! Thanks for breaking down the priority order so clearly - it really helps to have a roadmap rather than trying to figure out all these moving pieces on my own.