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Same slide different day
Any idea about red flag in Deloitte USI.?
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Can Amazon please do a stock split 😭
Concept of Retirement
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It always amazes me that the government sets up such complicated schemes for relatively little money
Not really a big deal.
Maybe I’m missing something - but I don’t see how this is much different from just starting a Roth IRA for your kids when they are young and letting compound internet work it’s magic over their lifetime.
That is what I have been doing for several years. Whatever my kid puts in from their job I match
Your kids are going to college. Chances of them working and funding a Roth before they graduate from college is slim. This let's them get 35k by 22.
At 8%, if they never funded again, they'd have 70k at 31, 140k at 40, 280 at 49, 560 at 58, and 1.12m at 67, normal social security time for them, with no taxes due. That's 4500 a month (in inflated dollars, of course) in income guaranteed in an annuity, tax free in retirement, if you're so inclined.
You get a state tax deduction on what goes in, and what you don't use, you can roll to their kids.
This is a legacy wealth-building tactic.
you could also leave it in the 529 for grandchildren if you wanted
Chief
It’s already mom and dads money and still requires earned income. When my kids are old enough to work I’m already planning on doing “matching” contributions to a Roth IRA for them.
Now, I suppose I could make an extra contribution to the 529 and then roll that money into the Roth so I get the state tax deduction.
35k cap…
Conversation Starter
$35k lifetime maximum?
One thing I haven't found a clear answer on - Does the annual Roth contribution cap cover both the 529 rollover and any contribution made by the account holder from their taxable income? Or is this a way for someone in their 20s to effectively double their annual Roth contribution?
Thanks - very helpful!
If that's the case, this provision is not all that useful since you could make your kid's Roth contribution regardless.
It would still make sense to transfer older kids' leftover balance to the youngest kid, so it ends up being 'insurance' on the youngest kid's ending balance
Can I start a 529 for my nephew?
Chief
You can. Best to coordinate with the parents. Current rules treat distributions from an account owned by anyone other than the parent/guardian as income for the student but that is supposed to change soon. I believe when the next FAFSA comes out.
Chief
OP the beneficiary still needs earned income though. It’s not a freebie. It’s nice but it doesn’t get you much unless you are a high earner in a high tax state.
Chief
Hmmm. I can no longer find anyone saying it is a requirement and at best now I can find people saying it is unclear if there is an earned income requirement.
I haven’t read into it much since it initially was signed. It is definitely a nicer opportunity for wealth transfer if there is no earned income requirement though.
I’m sure the IRS will provide some clarity on the rules before it goes into effect in 2024.
Not really that big of a deal 😅