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Is the balance too large to transfer to a Roth IRA?
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Oct 22, 2023 03:06
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| # ? May 24, 2024 13:34 |
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KYOON GRIFFEY JR posted:Is the balance too large to transfer to a Roth IRA? In one go, yeah ($20k). But you can do that every year, right? That's why I think rolling it into another 529 is best, then he'll get $12k into it in the next couple of months, then most of the rest the next year.
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Oct 22, 2023 05:42
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What interest rate are you goons getting with your savings accounts (as in no commitment other than a minimal amount, and can be freely transferred to other, such as checking, accounts), and where are you getting them from?
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Oct 22, 2023 09:17
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Ham Equity posted:In one go, yeah ($20k). But you can do that every year, right? Why would rolling it in to another 529 be best? If anything thats worse. You need a 15 year old account with more than 5 year old contributions, opening a new account would reset the account age clock. If the account meets those criteria, then in 2024 and beyond your friend can transfer the IRA contribution limit from the 529 to their Roth IRA every year. Call it four years or so based on a 20k balance. Note that this counts towards IRA contribution limits in a given year. If the account doesnt meet those criteria your friend should just sit on it til it does. Dont contribute anything to it (sounds like this isnt an issue) and wait.
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Oct 22, 2023 12:52
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ninjoatse.cx posted:What interest rate are you goons getting with your savings accounts (as in no commitment other than a minimal amount, and can be freely transferred to other, such as checking, accounts), and where are you getting them from? 4.4%, Marcus.
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Oct 22, 2023 12:53
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ninjoatse.cx posted:What interest rate are you goons getting with your savings accounts (as in no commitment other than a minimal amount, and can be freely transferred to other, such as checking, accounts), and where are you getting them from? Ally Savings 4.25% APY (Interest rate 4.16%) No minimum balance required
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Oct 22, 2023 13:33
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I'm getting 4.7% on Vanguard's cash plus account, but it's a bit less convenient to use than my old ally savings was so I dunno if I'd recommend it.
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Oct 22, 2023 14:05
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KYOON GRIFFEY JR posted:Why would rolling it in to another 529 be best? If anything that’s worse. You need a 15 year old account with more than 5 year old contributions, opening a new account would reset the account age clock. quote:So, I have a friend who recognizes that he is never going to use the 529 his parents set up for him for educational stuff, and decided to withdraw all of it. He's in the 22% bracket, this is likely to push him up into the 24% bracket, plus the 10% penalty (it's roughly $20,000). He did this a couple of weeks ago, and while I know a bit about personal finances, I'm not great with 529s.
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Oct 22, 2023 17:32
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5.2% SGOV. Not actually a savings account but fairly close in practice.
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Oct 22, 2023 17:33
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Ham Equity posted:I hadn't thought about it resetting the clock... I wonder if his old broker can reopen the old account? Im really confused as to what they did thus far (close old account and transfer balance to another 529? Do I understand that correctly?) and what they intend to do. Theres no particular sense of urgency as new 529 rules dont go in to effect until 24, so if they havent done anything just have them keep not doing anything for now.
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Oct 22, 2023 17:49
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VMFXX at about 5.4% yield right now, and where I have most cash parked in my brokerage sweep account. My Capital One HYSA which is perfectly fine and good is at only 4.3%, so the 1%+ rate spread makes it worth moving most of it into the money market fund right now. Same liquidity and if US government securities stop paying we're all hosed anyway.
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Oct 22, 2023 17:52
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KYOON GRIFFEY JR posted:I’m really confused as to what they did thus far (close old account and transfer balance to another 529? Do I understand that correctly?) and what they intend to do. There’s no particular sense of urgency as new 529 rules don’t go in to effect until 24, so if they haven’t done anything just have them keep not doing anything for now. He just withdrew it and closed the account. Like, into a checking account.
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Oct 22, 2023 17:54
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Oh that was loving dumb. No take backs. Friend is gonna pay the tax bill.
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Oct 22, 2023 17:57
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I'm getting 5.26% on Raisin via Western Alliance Bank. There's a couple places at 5.27% as well on here.
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Oct 22, 2023 18:01
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What's the current thread title from? Anyone have a source?
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Oct 22, 2023 18:26
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KYOON GRIFFEY JR posted:Oh that was loving dumb. No take backs. Friend is gonna pay the tax bill. I mean, he should be able to roll $6k of it into a Roth if he does it in the next few weeks, right? It'll mitigate about $2k of that. Blecchh, I was hoping to be able to unroll a bit of this, save him a hefty tax bill.
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Oct 22, 2023 18:32
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Ham Equity posted:I mean, he should be able to roll $6k of it into a Roth if he does it in the next few weeks, right? It'll mitigate about $2k of that. Why? Its not in a 529. At this point that money has been withdrawn from the 529 and your friend is free to do with it as they will - but they owe the price to turn the magic 529 money in to fully fungible dollars. Your friend can use that money to fund their IRA but theyre not going to receive any tax benefits for doing so.
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Oct 22, 2023 18:47
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KYOON GRIFFEY JR posted:Why? Its not in a 529. At this point that money has been withdrawn from the 529 and your friend is free to do with it as they will - but they owe the price to turn the magic 529 money in to fully fungible dollars.
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Oct 22, 2023 18:58
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That is true but also: once you move the money out of the 529 in to a checking account, that ship has sailed. If your friend did the same thing in 2024 they would have the same issue.
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Oct 22, 2023 19:00
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KYOON GRIFFEY JR posted:That is true but also: once you move the money out of the 529 in to a checking account, that ship has sailed. If your friend did the same thing in 2024 they would have the same issue. I thought you had a 60-day window to get it moved into a tax-advantaged account once you withdraw it...?
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Oct 22, 2023 19:08
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If its been fewer than 60 days they could probably roll it in to a different 529 plan. Basically two options if within 60 days: Roll the money in to a new 529. They will have to sit on it for 15 years before contributing to an IRA. Ideally theyll end up with more than 35k so theyll have to take some money as a penalized distribution but you still get free money, to a degree. (They could also roll it in to a new 529 and use it as an actual 529 - even if they arent going to use the money for QHEE, you can change the beneficiary to spouse, child, relative etc. you also dont have to take this decision right away) Second option is to pay the taxes and penalties on it. I dont particularly like paying taxes that I dont have to, and I would have no immediate need for the money, so Id probably go with door 1. But if your friend has a more urgent need for money, that could be more useful. The major macro lesson learned here is very carefully research your options before doing stuff with tax advantaged accounts. The rule changes are clearly published and all over the place if you just google 529 distributions
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Oct 22, 2023 19:18
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Guinness posted:VMFXX at about 5.4% yield right now, and where I have most cash parked in my brokerage sweep account. For some reason, Capital One has not raised the interest rate on my account over there, so they're only giving me what I was getting like 3 years ago (I think less than 1%). Saw other people complaining about it, so check your rates! My local bank was offering a higher rate than Capitol One was promoting, so I'm over there at the moment.
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Oct 23, 2023 16:19
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Uthor posted:For some reason, Capital One has not raised the interest rate on my account over there, so they're only giving me what I was getting like 3 years ago (I think less than 1%). Saw other people complaining about it, so check your rates! Every few years it seems they introduce a new type of savings account that has the best rate. It's a minor annoyance, but it takes all of sixty seconds to move over. In the nearly 20 years I've had accounts with Cap One (ne ING Direct) I've had to "move" accounts twice to keep the best rate. Dumb, but banks gonna bank and other than that CO has given me very little bullshit.
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Oct 23, 2023 17:06
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Uthor posted:For some reason, Capital One has not raised the interest rate on my account over there, so they're only giving me what I was getting like 3 years ago (I think less than 1%). Saw other people complaining about it, so check your rates! That "some reason" is like the whole point of running a bank and taking consumer deposits. When interest rates go up they get to make more money by paying the same old below-market interest since most people won't bother shopping around.
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Oct 23, 2023 22:06
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Yeah COne wants to have their cake (keeping old sticky deposits at lower rates) and eat it too (stay competitive on the HYSA leaderboards of nerd wallet or whatever). So they were sneaky and invented a new class of savings account and didn't migrate anyone over. It was easy to move the money though if you're paying attention. If you really want to min-max FDIC insured deposits just buy 1-3 month brokered CDs. You'll get 75-100 bps more too.
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Oct 24, 2023 12:44
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Yeah, well, after years of paying attention and not seeing any problems, I kind of stopped looking at the savings account and was shocked when I finally noticed. So, I'm warning others about it.
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Oct 24, 2023 13:12
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KYOON GRIFFEY JR posted:If its been fewer than 60 days they could probably roll it in to a different 529 plan. One other option, if this just happened and he hasnt deposited the check yettwo big ifs. Then he could call the original custodian and see if they will reverse the transaction if he sends the check back to them. A lot of insurance carriers will reverse off surrenders or withdrawals on annuities if the recipient doesnt deposit the check and its within the 60 days and then everyone pretends like it never happened.
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Oct 24, 2023 19:16
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danielski posted:One other option, if this just happened and he hasn’t deposited the check yet…two big ifs. Then he could call the original custodian and see if they will reverse the transaction if he sends the check back to them. A lot of insurance carriers will reverse off surrenders or withdrawals on annuities if the recipient doesn’t deposit the check and it’s within the 60 days and then everyone pretends like it never happened. It was an online transfer, not a check. I've encouraged him to call the broker already, see if it can be undone.
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Oct 24, 2023 19:22
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Ham Equity posted:It was an online transfer, not a check. Its certainly worth the call. If they will take it back then he can wait until 2024 and start rolling it to his Roth.
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Oct 24, 2023 21:45
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If someone doesn't have debt and doesn't have access to a 401k but is already contributing to a Roth IRA, is there anything specific they should do investment-wise? Or is it just index funds in a taxable brokerage account?
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Oct 25, 2023 22:03
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Magnetic North posted:If someone doesn't have debt and doesn't have access to a 401k but is already contributing to a Roth IRA, is there anything specific they should do investment-wise? Or is it just index funds in a taxable brokerage account? Check out the OP in the long term investing thread for a handy flowchart that's reasonably up to date, iirc. I believe the short answer is no not really.
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Oct 26, 2023 00:20
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Magnetic North posted:If someone doesn't have debt and doesn't have access to a 401k but is already contributing to a Roth IRA, is there anything specific they should do investment-wise? Or is it just index funds in a taxable brokerage account? Are you a 1099 or W2 employee? I think if you're 1099, you might be able to set up your own 401k.
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Oct 26, 2023 00:27
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This is W2, and yeah, I checked the flowchart. (What a fantastic thing that is.) Just figured I'd confirm I wasn't missing something.
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Oct 26, 2023 00:28
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Jenkl posted:Check out the OP in the long term investing thread for a handy flowchart that's reasonably up to date, iirc. I believe the short answer is no not really. I put the same flowcharts in the OP of this thread back at the same general time!
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Oct 26, 2023 00:35
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Magnetic North posted:This is W2, and yeah, I checked the flowchart. (What a fantastic thing that is.) Just figured I'd confirm I wasn't missing something. Do you have a pension?
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Oct 26, 2023 01:18
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My company has decent 401k terms (3% full match and half match up to 5%) but I don't think I'm going to be there for very long. Does it make sense to start now? FWIW I have no debts other than minimal student loans.
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Oct 26, 2023 03:54
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DildenAnders posted:My company has decent 401k terms (3% full match and half match up to 5%) but I don't think I'm going to be there for very long. Does it make sense to start now? FWIW I have no debts other than minimal student loans. Maybe, is there a vesting schedule on the employer match? What are the interest rates on your student loans? Do you have 3-6 months of expenses saved up as an emergecny fund otherwise? There are some additional questions but those are a good starting point.
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Oct 26, 2023 04:04
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Ham Equity posted:Do you have a pension? No. Thinking on it, I suppose I might want to remain somewhat liquid in case I try to buy a house, but I'm not sure just yet. I would be treating the house as a lifestyle purchase, not necessarily an investment. While I believe if that money were in a taxable brokerage account I could theoretically withdraw from there without penalty other than capital gains on the growth, the issue would be the volatility meaning I could potentially lock in losses over such a short term for stocks.
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Oct 26, 2023 12:22
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If you have a HDHP you should open a HSA. If you have a kid or anticipated future educational expenses a 529 is a useful tax advantaged account. Do you not have access to a 401(k) (or 403(b)) because you are W2 employee at a company that doesn't offer a 401(k)? If so I would agitate a bit for some kind of retirement benefit. If you're a 1099 contractor there are a host of things you can potentially do.
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Oct 26, 2023 13:25
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| # ? May 24, 2024 13:34 |
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A HDHP likely won't work for reasons, no need of a 529, and the 401k exists but is a benefit restricted by time of service. In this case, this is trying to be thoughtful about bridging that gap to that benefit but I also know others who have no 401k and that I am trying to cajole into contributing to Roth IRAs so I asked quite generally.
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Oct 26, 2023 13:35
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