Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated August 3, 2026. Quick answer: your retirement account balance is not a reportable asset on the FAFSA. That much of the common advice is right. What it leaves out is that the flows are not sheltered — money you put in during the base year gets added back to your income, and untaxed money you take out does too. The balance is invisible; the movement is not.
What actually counts as a parent asset
The federal formula enumerates it, and the list is the answer:
11. Cash, savings, and checking accounts + 12. Net worth of current investments • Includes: time deposits, money market funds, real estate (excluding primary residence), vacation homes, income producing property, trusts, stocks, bonds, derivatives, securities, mutual funds, tax shelters, and qualified education benefits • If negative, enter zero + 13. Adjusted net worth of businesses and/or farms + 14. Net worth = 15. Asset Protection Allowance (APA) (Table A4) – 16. Asset Conversion Rate (12%) x 0.12 17. Parent Contribution from Assets (PCA) • (Line 14 minus line 15) times line 16.
— U.S. Department of Education, Federal Student Aid, 2026-27 Student Aid Index (SAI) and Pell Grant Eligibility Guide, Version 1.1, August 2025 — Formula A, lines 11-17
Read what is on that list: cash and savings, investments, real estate other than your primary residence, vacation homes, trusts, stocks, bonds, mutual funds — and qualified education benefits, which is to say 529 accounts. Retirement accounts do not appear. Their absence from an exhaustive list is what shelters them.
The part almost every article gets wrong now
There used to be an age-based asset protection allowance that grew as parents got older, and a great deal of advice still describes it. Here is the current table:
Table A4: Asset Protection Allowance (Parents Only). Age of older parent as of 12/31/2025 — Allowance if there are two parents / Allowance if there is only one parent: 25 or less $0 $0 … 45 $0 $0 … 65 or older $0 $0.
— U.S. Department of Education, Federal Student Aid, 2026-27 Student Aid Index (SAI) and Pell Grant Eligibility Guide, Version 1.1, August 2025 — Table A4, Asset Protection Allowance (Parents Only)
Zero, at every parent age, whether there are two parents or one. Not a small number — zero. So the asset formula is now simply net worth times twelve percent, assessed from the first dollar. If you read anywhere that the formula shelters your first several thousand in savings, that guidance predates the current rules.
See how this fits the rest of your plan
Where money is saved changes what it costs you later, and an adviser can weigh this account against the rest of your savings before you commit to it.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
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What happens when you press the button
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Where the retirement shelter leaks
Now the part that matters for anyone still working:
a. Parents’ AGI b. Parents’ Deductible Payments to IRA/KEOGH/Other + c. Parents’ Tax-Exempt Interest Income + d. Parents’ Untaxed Portions of IRA Distributions (Subtract IRA rollover; if total is less than zero, enter zero) + e. Parents’ Untaxed Portions of Pensions (Subtract Pension rollover; if total is less than zero, enter zero)
— U.S. Department of Education, Federal Student Aid, 2026-27 Student Aid Index (SAI) and Pell Grant Eligibility Guide, Version 1.1, August 2025 — Formula A, Parent Income Additions
Two separate leaks:
- Contributions get added back. Deductible payments to an IRA or Keogh in the base year are added to income for the formula. Contributing does not reduce what the formula sees; it reduces your taxable income but not your assessed income.
- Untaxed distributions get added back — the untaxed portions of IRA distributions and of pensions, less rollovers. The rollover subtraction is important: moving money between accounts is explicitly netted out, so a rollover is not treated as income.
The practical implication for an older parent: a large Roth conversion or an unusual withdrawal in the base year can raise the assessed income substantially even though nothing about your wealth changed. Roth conversions and financial aid.
What this does not tell you
Colleges that use their own institutional methodology in addition to the FAFSA frequently do count retirement assets and home equity. This page describes the federal formula only. If your child is applying to schools that require an additional aid form, ask that school directly how it treats retirement accounts, because the answer is often different.
Honest gaps
We have not reproduced the income protection allowance tables, the business and farm net worth adjustment, or the Pell eligibility thresholds. This page covers how retirement money is treated, which is the question people actually arrive with.
Related: grandparent 529 accounts · college versus your own retirement.
General information drawn from the Internal Revenue Code, Treasury regulations and IRS publications, not legal or tax advice. Thresholds and dollar figures are adjusted regularly and several of the rules here turn on facts this page cannot see, so check the current year before you act on a number.