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GoGoGadgetChris posted:I think I can even contribute $7,000 next week and do a Conversion of $13,500 without issue?
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Dec 29, 2023 21:59
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Subvisual Haze posted:Contributions are flexible, you can still make contributions for 2023 several months into 2024. oh yeah I knew that lol backdoor shouldn't have tax consequences assuming the trad ira was empty prior to making the contribution and then it's immediately converted, although there is a form to file
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Dec 30, 2023 00:09
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Subvisual Haze posted:You waited until the last business day of the year to do a roth conversion? i just spent the last 20 minutes dreading futzing with the treasury direct website but turns out they eliminated that pesky type and tap keyboard, yay easier buy for ibonds
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Dec 30, 2023 00:48
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We're looking at 529 plans for our kids, and the potential penalties are kind of making me turn up my nose at investing too much in one. If my kids decide to go to community college, paying an extra 10% on the gains seems pretty steep. But if it looks like the plan is going to have too much in it, it sounds like the contributions could be withdrawn without penalty? Is that correct?
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Dec 30, 2023 01:04
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Yeah, just a weird quirk that they give a grace period to backdate contributions but not conversions. It'd be the same 8606 form either way, just with a couple more boxes to fill in to account for the remaining IRA value present at the previous year's end. Tax wise though it would be the same situation where you only generate a couple dollars of income on the small amount of earnings that accumulate between contribution and conversion. Although not really significant, it is possible the earnings will be a bit more noticeable now with ~5% interest rates on cash at many brokers. With max contribution somewhere just under a dollar a day of earnings will accumulate if I'm doing the math right.
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Dec 30, 2023 01:04
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YEah per my tax enthusiast, it's no issue to contribute in December 2023 and convert in January 2024, unless you start goofing up the process multiple years in a row and making the 8606 more of a headache
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Dec 30, 2023 01:32
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QuarkJets posted:We're looking at 529 plans for our kids, and the potential penalties are kind of making me turn up my nose at investing too much in one. If my kids decide to go to community college, paying an extra 10% on the gains seems pretty steep. But if it looks like the plan is going to have too much in it, it sounds like the contributions could be withdrawn without penalty? Is that correct? Mostly though remember 529s are very flexible and you can change the beneficiary at any time. This allows you more flexibility in changing the beneficiary to someone who has more qualified expenses if necessary. Hell, you can change the beneficiary to yourself if you want. 529s can also be used to reimburse up to $10k lifetime in student loan payments, which ties in well with the ability to change account beneficiary. Beyond tuition, 529s can reimburse room+board/rent for full time students, and also cover technology needs (who's to say gaming pcs aren't necessary). Even if your kids are going to community college, its safe to imagine rent won't be cheap.
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Dec 30, 2023 01:42
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Merit based scholarships or similar scenarios should offer 1:1 offsetting 529 withdrawals so planning ahead doesn’t feel like a penalty. The rule would likely be abused, but if your kid gets a full ride athletic scholarship to Stanford you should get to take some money out as a treat.
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Dec 30, 2023 04:24
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QuarkJets posted:We're looking at 529 plans for our kids, and the potential penalties are kind of making me turn up my nose at investing too much in one. If my kids decide to go to community college, paying an extra 10% on the gains seems pretty steep. But if it looks like the plan is going to have too much in it, it sounds like the contributions could be withdrawn without penalty? Is that correct? 529s cover a lot in the current form of them. On top of 4-year university, you can also reimburse certain primary school, vocational school, and community college expenses. And as mentioned by others, switching beneficiaries is very easy and unused portions can now be rolled over into Roth IRA accounts. IRS Publication 970 in the "Qualified Tuition Program" section has all the details. https://www.irs.gov/publications/p970
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Dec 30, 2023 13:48
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Since 529s are being talked about, I'll note that due to the 2020 FAFSA Simplification Act, starting in 2024, 529s of anyone other than custodial parents no longer effects the FAFSA EFC. And since you can gift money to other people's 529's (up to gift tax limit, 18k in 2024 but but with 529s you can pro-rate a lump sum into 5 years if you want to go beyond that), if you want to set up an account for your kids, and you have living parents/siblings, you can get them to set up a 529, with your kid as a beneficiary, and then just put money into that account yourself.
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Dec 30, 2023 14:48
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Wait, are grandparental 529s better than parental 529s now? I just looked it up (https://www.savingforcollege.com/article/new-fafsa-removes-roadblocks-for-grandparent-529-plans) and it seems grandparent 529s do not have to report assets or distributions on the FAFSA. About 5% of Parental 529s still count as assets for the student, so it seems as least for FAFSA that it'd be preferable for grandparents to hold 529 over parents. I also see that there is a separate CSS profile, which does take 529s into account, so I'll need to look into that. drainpipe fucked around with this message at 15:47 on Dec 30, 2023 |
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Dec 30, 2023 15:42
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drainpipe posted:Wait, are grandparental 529s now better than parental 529s now? I just looked it up (https://www.savingforcollege.com/article/new-fafsa-removes-roadblocks-for-grandparent-529-plans) and it seems grandparent 529s do not have to report assets or distributions on the FAFSA. About 5% of Parental 529s still count as assets for the student, so it seems as least for FAFSA that it'd be preferable for grandparents to hold 529 over parents. Not just grandparents, but, also siblings, uncles, aunts, cousins, and non-custodial parents. Under the EFC, any 529 distribution from anyone other than a student's custodial parents would count as income of the student. But the 2020 FASFA Simplification Act did away with all that by replacing EFC with the SAI starting with the 2024-2025 FASFA. I don't know why articles keep focusing on grandparents in particular.
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Dec 30, 2023 15:54
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Friday at work I decided that doing calculations based on Dave Ramsey’s 8% withdrawal advice was more important than doing project plan updates. Here is what I came up with. The below table shows what happens If you invested $1 million in the S&P 500, reinvested dividends, and took out 8%. The first column is the year of retirement, the second is when the remaining balance drops below the withdrawal amount. I assume you retired at the end of the year, and withdrew 8% at the end of each year. I also assumed that the amount you withdrew was indexed for inflation and all dividends are reinvested. 1980 - 2011 1985 - Hasn’t run out yet. 2022 EOY balance = 4.5 million 1990 - Hasn’t run out yet. 2022 EOY balance = 2.1 million 1995 - 2018 1999 - 2008 2000 - 2010 2005 - 2021 2007 - 2022 2010 - Hasn’t run out yet. 2022 EOY balance = 1.9 million 2015 - Hasn’t run out yet. 2022 EOY balance = 1.5 million 2020 - Hasn’t run out yet. 2022 EOY balance = 0.9 million I chose 1999, and 2007 because those two years are right before the stock market is having a really bad year. Feel free to copy my lovely spreadsheet and plug your own stuff in. I would have preferred to use the historical Total annual returns from a fund like FXAIX but I couldn’t find Total returns that go back farther than 2013. Spreadsheet; https://docs.google.com/spreadsheets/d/1WV0JSkXaGlWifa1aOwc7y77tOZicc1-p/edit?usp=sharing&ouid=115671631728192313916&rtpof=true&sd=true Sources https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi https://dqydj.com/sp-500-return-calculator/
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Dec 30, 2023 16:07
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MegaZeroX posted:Not just grandparents, but, also siblings, uncles, aunts, cousins, and non-custodial parents. Under the EFC, any 529 distribution from anyone other than a student's custodial parents would count as income of the student. But the 2020 FASFA Simplification Act did away with all that by replacing EFC with the SAI starting with the 2024-2025 FASFA. I don't know why articles keep focusing on grandparents in particular. this is wild, seems stupid that the law would create an incentive for parents to... not contribute to parent-owned 529's. what's the point of parent-owned 529s anymore if you have other family members available who you trust? some piddly state tax benefit that pales compared to future FAFSA asset checks?
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Dec 30, 2023 16:10
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FAFSA is still largely used for need based aid, correct? If you're not expecting a lot of need based aid I guess it won't change much?
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Dec 30, 2023 16:27
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Speaking of 529s, there are no weird time- based rules for withdrawals, right? I'm trying to pay tuition for January and whenever I try to make a payment from my 529 it says it is "locked" and the admin hasn't gotten back to me in weeks.
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Dec 30, 2023 16:57
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daslog posted:1999 - 2008 Thanks, I wasn't feeling paranoid enough about my retirement until I saw this post (kidding). Your spreadsheet requires permission to view, btw, so I requested access.
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Dec 30, 2023 18:07
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pmchem posted:this is wild, seems stupid that the law would create an incentive for parents to... not contribute to parent-owned 529's. what's the point of parent-owned 529s anymore if you have other family members available who you trust? some piddly state tax benefit that pales compared to future FAFSA asset checks? Yeah, this is the part that seems crazy to me. Well, the in-laws are supposed to pay us back for some plane tickets, so I guess I’ll just have them open a 529 and deposit the money in there instead.
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Dec 30, 2023 19:03
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Am I overly naive in thinking that any concerns about FAFSA wrt 529s et al are kind of moot if you're a "high asset" family? Like does it really matter if a 529 counts towards FAFSA or not if your parents have millions? The little FAFSA aid calculators online tell me "lol" but I don't really know.
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Dec 30, 2023 19:21
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FAFSA does not count retirement accounts, so if the bulk of your savings are in there (as mine are), FAFSA still matters.
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Dec 30, 2023 19:32
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drainpipe posted:FAFSA does not count retirement accounts, so if the bulk of your savings are in there (as mine are), FAFSA still matters. Do you have a realistic numerical example of how much you could expect in additional aid if, say $100,000 was counted in parental assets vs not? I played around with the estimator and I'm pretty skeptical about this. Maybe once you get down to income and asset levels where people start getting more need based aid, but people who are arranging tax matters and doing loopholes should have a lot more in assets. pmchem posted:this is wild, seems stupid that the law would create an incentive for parents to... not contribute to parent-owned 529's. what's the point of parent-owned 529s anymore if you have other family members available who you trust? some piddly state tax benefit that pales compared to future FAFSA asset checks? 529s were passed 30 years after FAFSA. I assume that it's just a minor loophole and they just didn't think too hard about it. esquilax fucked around with this message at 20:04 on Dec 30, 2023 |
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Dec 30, 2023 19:57
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Iirc some colleges also have supplemental forms (beyond FAFSA) to determine financial aid, where they do include things like retirement accounts, etc.
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Dec 30, 2023 20:04
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Bremen posted:Thanks, I wasn't feeling paranoid enough about my retirement until I saw this post (kidding). Oops. Fixed!
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Dec 30, 2023 20:48
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Guinness posted:Am I overly naive in thinking that any concerns about FAFSA wrt 529s et al are kind of moot if you're a "high asset" family? Like does it really matter if a 529 counts towards FAFSA or not if your parents have millions? The little FAFSA aid calculators online tell me "lol" but I don't really know. Doing some napkin math Let's say we are going to send our kid to a needs-based university with an annual tuition of $50,000 (cheaper than many universities nowadays). Let's assume rely on the FAFSA instated of CSS or their own proprietary stuff. Then, assuming the child has is a dependent with no income, the parents only investments are in retirement accounts, and don't have any major assets like a house, how much would the parents have to earn to not get any aid? Based on SAI formulas, the parent's contribution hits $50,000 when their AAI hits $121,282. This means they have a post-tax income of $125,282, and, assuming they live somewhere without state income tax, a gross income of $168,063. So yeah, this is totally going to be abused.
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Dec 30, 2023 21:29
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Leperflesh posted:oh yeah I knew that lol However, if you have other traditional IRAs (or simple/SEP IRAs), then things get complicated
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Dec 31, 2023 19:35
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Happy Backdoor Roth Day!
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Jan 1, 2024 08:06
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Guinness posted:Am I overly naive in thinking that any concerns about FAFSA wrt 529s et al are kind of moot if you're a "high asset" family? Like does it really matter if a 529 counts towards FAFSA or not if your parents have millions? The little FAFSA aid calculators online tell me "lol" but I don't really know. Your thinking is correct. For some people there is literally no point in filling out the FAFSA paperwork.
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Jan 1, 2024 15:57
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Nice recap for the year. It was a good year to invest in pretty much anything: (note: QQQ is often mistaken as a tech ETF, but it actually includes a lot of non tech stuff as well like costco, pepsi, and comcast).
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Jan 1, 2024 18:34
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Guinness posted:Am I overly naive in thinking that any concerns about FAFSA wrt 529s et al are kind of moot if you're a "high asset" family? Like does it really matter if a 529 counts towards FAFSA or not if your parents have millions? The little FAFSA aid calculators online tell me "lol" but I don't really know. https://thecollegeinvestor.com/38170/529-plan-affect-fafsa-financial-aid/ First, if a 529 plan is owned by a dependent student or a dependent student’s parent, it's reported as a parent asset on the FAFSA and qualified distributions are ignored. Second, if a 529 plan is owned by an independent student, it's reported as a student asset on the FAFSA and qualified distributions are ignored. Third, if the 529 plan is owned by anyone else, it's not reported as an asset on the FAFSA. If the recipients are students or custodial parents, qualified distributions are not reported as income. But if the recipients are anyone else, starting in 2023 qualified distributions count no longer count as untaxed income to the student. This includes 529 plans owned by the non-custodial parent if the student’s parents are divorced or separated. BUT! The big question is, what is the actual reduction to the student's financial aid eligibility if big money is dragging the family? Read on... Dependent Student - 20% of the asset value Dependent Student's Parent - Up to 5.64% of the asset value, after subtracting a small asset protection allowance Independent Student With Dependents Other Than A Spouse - Up to 3.29% of the asset value, after subtracting a small asset protection allowance Independent Student Without Dependents Other Than A Spouse - 20% of the asset value, after subtracting a small asset protection allowance There are more charts and links with info about more specifics, but the long and short of it is that a 529 is usually more than worth the effort (pending which state program you're in but most are reasonable with fees and fund selections). The hit to financial aid is a fraction of its value, and that hit only takes effect because the student has access to a bunch of money. ALSO - FILL OUT THE FAFSA JUST DO IT. So many colleges use the FAFSA as their default info base for their financial aid packages and determining eligibility. Just fill it out! Any money you miss out on for having assets will not negate the money you do receive. Space Fish fucked around with this message at 20:49 on Jan 1, 2024 |
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Jan 1, 2024 20:44
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dexter6 posted:Happy Backdoor Roth Day! I thought I'd be clever this year and use my brokerage account settlement fund to fund my IRA/my wife's IRA because I thought the money would be in Vanguard already and that would somehow make it easier/doable in one day. It saves no time and is in fact worse than just pulling money from a checking account. You also can't "exchange" funds from say, your account to your spouse's account, even if the accounts are linked.
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Jan 1, 2024 20:52
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drk posted:Nice recap for the year. It was a good year to invest in pretty much anything: The good news is I was heavy into S&P 500. The bad news is I held those for two years, which takes it from a nice 26.19% return to .02%.
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Jan 1, 2024 21:25
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Residency Evil posted:I thought I'd be clever this year and use my brokerage account settlement fund to fund my IRA/my wife's IRA because I thought the money would be in Vanguard already and that would somehow make it easier/doable in one day. I tried to do this, where both IRA and taxable were under the same Vanguard login, and couldn’t get it to work. I finally found the right screen but then it said I had insufficient balance in my settlement account which was not true. So instead I now have this, both to the same checking account: 
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Jan 1, 2024 22:06
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Bremen posted:The good news is I was heavy into S&P 500. Clearly you should have waited a year before investing that. Lesson learned!
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Jan 1, 2024 22:10
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smackfu posted:I tried to do this, where both IRA and taxable were under the same Vanguard login, and couldn’t get it to work. I finally found the right screen but then it said I had insufficient balance in my settlement account which was not true. Apparently the right way is to "Exchange" funds from your brokerage settlement to your IRA settlement. I did that for my IRA, but it wouldn't let me exchange across to my wife's linked IRA. So kind of useless.
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Jan 1, 2024 22:11
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Bremen posted:The good news is I was heavy into S&P 500. The market was at an all time high 2 years ago, so you're either being a little sassy, or you had the worlds worst timing. Money invested into SP500 anytime before or after the ATH in January 2022 is going to be up much much more than 0.02%.
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Jan 1, 2024 22:47
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drk posted:Money invested into SP500 anytime before or after the ATH in January 2022 is going to be up much much more than 0.02%. Well... I started my brokerage in early 2021, and it currently has a 4.8% total rate of return. It was negative until a couple months ago, but still doesn't feel great. Probably won't make a huge difference in a few decades though.
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Jan 2, 2024 00:18
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Just compiled my 2023 numbers and my average yearly return since I starting investing 13 years ago in 2011 is 12.3%. Some years are great, 2013/2014/2019 pushing almost 30%, some are trash, 2022 by far my worst.
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Jan 2, 2024 00:54
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My wife had a 401k disbursement that we rolled into her IRA in late November. Life hit us with some Stuff while the funds were processing and they sat in a money market account until we got our heads above water last week. Cost ourselves a nice couple grand waiting out that end of year bounce.
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Jan 2, 2024 01:14
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Xenoborg posted:Just compiled my 2023 numbers and my average yearly return since I starting investing 13 years ago in 2011 is 12.3%. Some years are great, 2013/2014/2019 pushing almost 30%, some are trash, 2022 by far my worst. I started in 2016 and it's up 8.9%. Feels good.
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Jan 2, 2024 01:22
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drk posted:The market was at an all time high 2 years ago, so you're either being a little sassy, or you had the worlds worst timing. I didn't mean to actually imply I bought at the ATH, just that this year's gains pretty much exactly made up for 2022's losses. I actually made a pretty big purchase of VTI in September 2022 that has on paper done spectacularly well, but less so when you consider I was really just moving into it after selling other stuff that was more or less equally low at the time.
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Jan 2, 2024 03:22
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