Will Having a Roth IRA Hurt My Child’s Financial Aid?

I frequently recommend that parents use Roth IRAs to help save for their children’s college education. 

If the child has earned income, they could open their own Roth IRA; if they don’t have earned income, then the parents could use their own Roth IRAs to help save for college (assuming they qualify to contribute to a Roth).

But, can opening a Roth IRA hurt your child’s chances for financial aid?

"No", says Janet Bodnar of Kiplinger.com.  "Opening a Roth for your child probably won’t hurt his chances for financial aid. The federal formula for calculating how much a family can pay doesn’t assess retirement accounts — and that goes for your child’s account as well as your own."

Even if the college does include Roth IRAs in the financial aid formula (some schools do consider retirement accounts in the financial aid calculation), the impact should be small since your child probably won’t have much stashed away in his/her Roth IRA.

Click here for more information and Roth IRAs and financial aid.