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Hello all. Hopefully someone can provide me some assistance!
I am likely going to graduate school this fall. I am in my mid 20s and have been working since graduating college.
I would like to decrease my "assets" as much as possible for the purposes of obtaining low-interest federal financial aid. One way of doing this is retirement funds, which are not considered assets on the FAFSA form.
I have already contributed the max ($5000) to a Roth IRA for 2009 tax period. My question is for 2010 IRA contributions.
I can put the full $5000 into an IRA again this year and would like to do so in the next couple of weeks before I need to start filling out FAFSA/financial aid forms.
My question boils down to: Traditional or Roth IRA?
Let me posit this scenario, and if I am mistaken someone please tell me.
I deposit $5000 into a Traditional IRA next week. This money can be deducted from my AGI for tax purposes for 2010. Then, once I am a student, and making effectively $0 income for 2-3 years, I can roll the Traditional IRA into a Roth IRA and pay very little tax if any at all. This seems a good way to both (a) keep money from being considered assets for financial aid purposes and (b) sock away retirement funds at a tax benefit.
The only downside I see to this is that the funds are locked up while they are in a Traditional IRA and for 5 years after rolling over to a Roth (correct?). It is my understanding that contributions to a Roth can be withdrawn at any time with no penalty.
Also -- could I contribute $5000 to a Traditional IRA in 2010 (say February) and then roll it over to a Roth as soon as 2011 to benefit from the tax savings, anticipating I'll be making $0 (or close) in 2011 as a grad student?
Any advice here would be very helpful!
Thanks a bunch
I am likely going to graduate school this fall. I am in my mid 20s and have been working since graduating college.
I would like to decrease my "assets" as much as possible for the purposes of obtaining low-interest federal financial aid. One way of doing this is retirement funds, which are not considered assets on the FAFSA form.
I have already contributed the max ($5000) to a Roth IRA for 2009 tax period. My question is for 2010 IRA contributions.
I can put the full $5000 into an IRA again this year and would like to do so in the next couple of weeks before I need to start filling out FAFSA/financial aid forms.
My question boils down to: Traditional or Roth IRA?
Let me posit this scenario, and if I am mistaken someone please tell me.
I deposit $5000 into a Traditional IRA next week. This money can be deducted from my AGI for tax purposes for 2010. Then, once I am a student, and making effectively $0 income for 2-3 years, I can roll the Traditional IRA into a Roth IRA and pay very little tax if any at all. This seems a good way to both (a) keep money from being considered assets for financial aid purposes and (b) sock away retirement funds at a tax benefit.
The only downside I see to this is that the funds are locked up while they are in a Traditional IRA and for 5 years after rolling over to a Roth (correct?). It is my understanding that contributions to a Roth can be withdrawn at any time with no penalty.
Also -- could I contribute $5000 to a Traditional IRA in 2010 (say February) and then roll it over to a Roth as soon as 2011 to benefit from the tax savings, anticipating I'll be making $0 (or close) in 2011 as a grad student?
Any advice here would be very helpful!
Thanks a bunch
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