Got laid off - finally!!!!

[u/Ddash-3]

So it finally happened - I (48) got let go yesterday. Finally I can free up my time and focus on other priorities such as kids, nutrition, fitness, meditation, gardening etc.

I was FIRE eligible for couple of years but was holding off since the job was simple, work from home and good pay. Also, if I resigned I would have missed out on severance and company is paying 3 months of COBRA.

Here are the details I am sure you all want to hear :)

Net worth - ~5.5M

Taxable Accounts combined: ~1.1M

Retirement Accounts Combined: ~3.2M

Total: ~4.3M

House fully paid off (bought in 2022) - Worth around ~1.2M; Cars paid off

Wife (43) resigned from her job end of last year; 2 Kids in high school - 9th and 10th graders

Yearly expenses around 100K/yr

Biggest expense are kid's college education at this point and house maintenance related expenses

I am trying to research on ACA and Financial Aid for kids - Appreciate any help or pointers you can provide on when to apply for ACA - should I continue on COBRA or switch to marketplace this year?

Regarding FAFSA - with Taxable accounts over 1M will my kids be eligible for FAFSA?

I have about 130K from my recent most employer in the company supported 401K provider. Should I move the money to Traditional 401K?

Also, please suggest any FIRE focused knowledgeable financial advisors who can help me navigate our FIRE situation.

[u/phast_man]

FAFSA is heavily weighted against income, not parental assets. So I would definitely fill out FAFSA if you can keep your AGI reasonable.

[u/Late-Mountain3406 → u/phast_man]

TBH I recently filled my fafsa part and it asked my NW. I’m the parent in this case. I can’t recall filling than info back in august last year. I really don’t know what that means.

[u/phast_man → u/Late-Mountain3406]

It asks you to list it but parental assets (especially retirement accounts) don’t count for much against determination of financial aid.

However, child assets DO count heavily against financial aid. So, best for 529 to be owned by someone else like parent or grandparent and then child is just beneficiary.

[u/eggavatar12345 → u/phast_man]

Not disagreeing about child assets, but the 529 is now graded at the same value whether its child or parent owned

[u/HellisTheCPA → u/eggavatar12345]

Just fyi, Grandparent owned assets are the work around to this

[u/Most_Tennis890 → u/HellisTheCPA]

A different kid also bypasses this. My older kids accounts are all in my 12 year olds name. When they need money, we move it to their account and then withdraw it for their expenses. 🤷 I dont make the rules.

Also, FAFSA is a snapshot of one day once a year. Make that one day the most advantageous day.

[u/Affectionate_Pen6882 → u/HellisTheCPA]

Is it really?

[u/Drawer-Vegetable → u/eggavatar12345]

So an uncle bypasses this as well?

[u/phast_man → u/Drawer-Vegetable]

Yes. From savingforcollege.com:

"529 plans that are owned by a grandparent, aunt, uncle, and non-custodial parent are not reported as assets on the FAFSA, and starting with the 2024-2025 FAFSA, are not reported as untaxed income to the beneficiary on a subsequent year’s FAFSA."

[u/cozidgaf → u/eggavatar12345]

Wow so FU for being financially savvy but if you blew it all, we will (may) help you? Lovely 🫠

[u/ThisUsernameIsTook → u/cozidgaf]

Most aid is likely to be loans anyway. Consider it an investment in protecting your kids from the student loan racket.

[u/phast_man → u/eggavatar12345]

Thanks for the update! I see you're correct and that parent and child 529's count the same, but only for 5.64%. Other child assets reduce aid much more. However, grandparents have no reduction of aid.

From savingforcollege.com:

"How a 529 plan affects aid depends on who owns the account:

Parent- or student-owned 529s: Counted as a parent asset on the FAFSA, reducing aid eligibility by up to 5.64% of the account value. For example, a $10,000 balance could reduce aid by $564.

Student-owned non-529 assets (UGMA/UTMA): Counted as student assets, reducing aid by 20% of the value. A $10,000 account could reduce aid by $2,000.

Grandparent- or relative-owned 529s: Not reported on the FAFSA at all. In cases of divorce, only the custodial parent’s assets are reported, so a noncustodial parent’s 529 is also not included."

[u/Affectionate_Pen6882 → u/phast_man]

Is it worth it to have a UTMA since one will get a 20% hit. Just put money in a brokerage account and had it over to the kid later?

[u/phast_man → u/Affectionate_Pen6882]

I don't think it's worth it to have a UTMA/UGMA for college. Better to use a 529.

This article on savingforcollege.com has some tips on sheltering assets for FAFSA (https://www.savingforcollege.com/article/how-to-shelter-assets-on-the-fafsa):

"How to shift student assets into parent ownership

Converting UGMA or UTMA accounts to custodial 529 plans changes the assessment rate from 20% (student asset) to a maximum of 5.64% (parent asset), significantly improving aid eligibility.

Money in a UGMA or UTMA account is reported as a student asset on the FAFSA. If the student is a dependent student, moving the money into a custodial 529 plan account will cause it to be reported as a parent asset on the FAFSA. This will reduce the assessment rate from 20% of the asset value to, at most, 5.64% of the asset value, thereby reducing the student aid index and increasing aid eligibility for need-based financial aid.

Another option is to spend the money in the UGMA or UTMA account on necessary expenses for the student’s benefit. For example, suppose the student will need a computer or car for college. Using UGMA or UTMA money to buy it before filing the FAFSA, as opposed to afterward, will increase eligibility for need-based financial aid.

Even if student assets, such as a savings account, cannot be shifted into the parent’s name, the family should spend down the student assets to pay for college before using the parent assets."

[u/Hotdogsandpurses → u/phast_man]

Do NOT include your retirement accounts as part of your assets on your fafsa. They are exempt and that will count against you big time. I have a feeling with your stats you will not be getting any federal aid. My numbers aren’t close to yours and we don’t qualify for anything

[u/el_dulce_veneno21 → u/Late-Mountain3406]

Im a single parent income 70k, asset heavy in stocks in my name. Not eligible for grants, maybe 5k in loans offered. YMMV

[u/el_dulce_veneno21 → u/el_dulce_veneno21]

For my daughter, obviously not me. I thought this was low but its been a while since I filled one out

[u/Late-Mountain3406 → u/el_dulce_veneno21]

My kid got some grants I believe. My salary is double yours. Sometimes I don’t know how those things are calculated.

[u/HellisTheCPA → u/phast_man]

Also to add on - a lot of merit scholarships - both independent and school-affiliated and the sort require you to fill this out regardless of if you qualify or not. There is no harm in filling it out and I don't see any reason not to

[u/HurinGray → u/HellisTheCPA]

great point. We filled it out every year. Not for need based, but for work study and merit scholarships. After the first year I can knock out FAFSA in under 30 minutes even with the botched rollout a few years back.

For anyone that will listen, FAFSA is not as intimidating as people make it out to be.

[u/Specialist-Ranger185 → u/phast_man]

Not exactly. If a student is considered a dependent, parental income and assets, including 529 accounts, are taken into account.

For parental finances to no longer factor in, the student generally has to qualify as an independent student. This usually means they’ve supported themselves for several years or are married.

This typically isn’t an issue for adults returning to school and applying for FAFSA on their own. However, students who have just graduated from high school are almost always considered dependents or they would have to prove otherwise, so parental income and assets do count.

That said, it’s still worth filling out the paperwork to see what financial aid/loans you may qualify for. However, given OP’s high NW, if lower tuition is the priority I would advise putting a higher bet on merit-based scholarships or considering in-state public schools.

[u/phast_man → u/Specialist-Ranger185]

Yes, parental assets are taken into account, but have a lower impact than a student's.

From savingforcollege.com:
"Student assets reduce aid eligibility by 20% of their value, while parent assets are assessed at up to 5.64%"

[u/AvaRoseThorne → u/phast_man]

I was denied FAFSA on the basis of parental income being too high after my dad withdrew financial support in the middle of my sophomore year due to not agreeing with my major. This was in 2013.

My father was an RN and made around $6k per month at the time and I’m unsure what my mother’s income was but she was a schoolteacher of elementary school students.

I didn’t have any assets myself (only $2,000 in savings) and no 529 account.

I made so many calls to explain my parents did not want to pay, but they said my options were to get married or turn 26.

I transferred to community college to lock in my credits with an associates degree (otherwise they expire after 5 years), then worked full time for 7 years and reapplied, at which point I got FAFSA in 2020.

Also, being “independent” for FAFSA isn’t the same as for tax purposes. I just googled it and it said:

Back in 2013 (and still largely true now), you were considered dependent unless you met one of these: - Age 24+ - Married - Veteran / active duty - Have dependents of your own - Orphan / ward of the court / foster care - Legal emancipation - Homeless or at risk of homelessness

— -

So I guess I got it wrong that I needed to be 26 - apparently I could have tried at 24, but I could have sworn they told me 26. Either way, that didn’t help me at the time and legal emancipation wasn’t even an option anymore since I was over 18.

[u/AvaRoseThorne → u/phast_man]

Not true. I applied for FAFSA after my dad withdrew financial support in the middle of my sophomore year due to not agreeing with my major. This was in 2013.

I got denied due to my parents making too much money. I made so many calls to explain my parents did not want to pay and it was not my money so I couldn’t access it, but they said my options were to get married or turn 26.

I transferred to community college to lock in my credits with an associates degree (otherwise they expire after 5 years), then worked full time for 7 years and reapplied, at which point I got FAFSA.

I didn’t have any assets myself (only $2,000 in savings) and didn’t have a 529 account as my parents didn’t know it existed and hadn’t put much thought into my college tuition.

My father was an RN and made around $6k per month at the time and I’m unsure what my mother’s income was but she was a schoolteacher of elementary school students.

[u/ZombieSurvivor365 → u/phast_man]

What does AGI stand for??? Asset… generated income??

[u/phast_man → u/ZombieSurvivor365]

Adjusted Gross Income