New rules on how surplus 529 Education Savings funds can be used

If you or your child, grandchild or other person was fortunate enough to pay for their education without using all your 529 education savings funds, Congress recently passed legislation to help avoid penalties for using the money for other purposes. But first, consider whether the funds might be used for another family member or for graduate or professional school sometime in the future. 

Account withdrawals that aren’t used for qualified education expenses mean you will owe income taxes and a 10% penalty. Until now, if a student earns a scholarship, parents would be permitted to take a penalty-free 529 withdrawal, although income taxes would still be owed on the earnings portion of the withdrawal. Excess funds can be transferred to a sibling or other close relation such as a cousin.

Beginning in 2024, parents can now transfer part of that surplus to a Roth IRA for the beneficiary ro continue to grow tax-free.  The following details are quoted directly from the author, Adam M. Grossman founder of Mayport, a fixed-fee wealth management firm.

• There’s a lifetime limit of $35,000 per beneficiary that can be transferred from a 529 to a Roth.
• The amount that can be transferred each year is limited to the amount that could otherwise be contributed directly to an IRA. In 2024, that will be $7,000, meaning that it would take five years to move the entire $35,000.
• In years when funds are moved from a 529 to a Roth, those funds will count toward the beneficiary’s IRA contribution limit. Suppose that parents transfer $4,000 from a 529 account to their child’s Roth IRA. Since the child’s overall IRA contributions are capped at $7,000, he or she could only contribute an additional $3,000 directly to an IRA that year.
• The beneficiary would need to have earned income that’s at least equal to the 529-to-Roth transfer amount, just like the requirement for a regular IRA contribution. The child doesn’t have any earned income? No transfer is allowed.
• The usual income caps for direct Roth IRA contributions don’t apply. That’s a nice benefit of this new rule, allowing a high-income beneficiary to complete a 529-to-Roth transfer.
• To be sure parents use the new provision in the way it was intended—that is, truly for surplus funds—there are two additional restrictions. First, the 529 account must be at least 15 years old. Second, any funds contributed to the 529 within the most recent five years aren’t eligible to be transferred. Neither of these restrictions is a permanent obstacle, but they can slow transfers.
• The 529 account must be at least 15 years old. 
• Any funds contributed to the 529 within the most recent five years aren’t eligible to be transferred. 
  

This strategy is a great way to use 529 funds for a child (grandchild) who chooses not to pursue higher education.

Grossman provides more details and perspective in his article Strings Attached published in the Humble Dollar newsletter (which I highly recommend): https://humbledollar.com/2023/12/strings-attached-2/?utm_source=mailpoet&utm_medium=email&utm_campaign=another-ses-test_7

Utahns: Find out which natural disasters your county faces

Homeowners insurance is growing more expensive or hard to find because of natural disasters. The Salt Lake Tribune breaks down which counties have the highest risk for some of the havoc. 

"As wildfires, floods and other natural disasters wreak havoc across the country, insurers are raising premiums or pulling out of some markets altogether because of the risk" writes Megan Banta for The Salt Lake Tribune.   | Dec. 28, 2023

 Wonder why your Homeowners insurance had increased substantially for the past couple of years? 

"Premiums increased an average of 21% from May 2022 to May 2023 across the country and more in Florida and some western states including Utah, according to a report from Policygenius." HO insurance is not only becoming more expensive but also, harder to get. Friends of mine have had their insurance cancelled after a very minor claim. 

According to Banta's research: "Summit County and five other counties in Utah have a “relatively high” risk of wildfire, according to the National Risk Index, part of the Federal Emergency Management Agency. The other 5 counties are: Washington, Iron, Tooele, Salt Lake, and Utah. 

Banta's investigation also identified Utah counties at highest risk for avalanche, earthquake, and landslide. 

Of course, certain areas within a county likely have little or no risk of landslides and avalanches. So consider location when purchasing or renting property. One can still see the massive boulders that crushed a house and killed two people in Rockville. Just this year a house in LaVerkin started to crack and slide into the canyon where it was perched. Within the past decade Santa Clara lost some homes to the same risk of being built on the edge of a cliff for the view. Other counties provide numerous examples of housing being built where it never should have been located.  

The wildfire problem grows each year with our changing, hotter climate and as people build homes at the urban-wildland interface.

Unfortunately, HO insurance doesn't cover loss due to earthquake, flood and earth movement. 

Check out the other posts in this blog on related topics. 

Read the full article at: 

https://www.sltrib.com/news/2023/12/28/heres-where-utahns-face-highest/?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_864285712.28.23%20Top%20Stories 

If you are not a Salt Lake Tribune subscriber and live in Utah... maybe it is time. 

Don't believe any of the investing forecasts

Wall St. Loves to Guess, but Nobody Knows What the Market Will Do in 2024

So-called stock forecasts don’t deserve the name, our columnist says. Wall Street’s track record is horrendous.

By Jeff Sommer,who writes Strategies, a weekly New York Times column on markets, finance and the economy.

"Wall Street strategists are issuing forecasts for the performance of the stock market in 2024.

Pay them no mind.

The predictions are usually wrong, and when they’re right it’s only by accident."

These forecasts get a tremendous amount of media coverage but aren't worth the paper/pixels they are written on.

Sommer advises: "If you find them entertaining or otherwise illuminating — wonderful. Enjoy them."

"But at all costs, don’t take them at face value because there is no evidence that anyone can predict the market’s movements reliably, and a great deal of evidence that buying and selling stock on the basis of your views about the market’s impending movements is a fool’s game."

It is amazing how much money these investment analysts and gurus are paid to speculate about the future. 

In 2019 who would have predicted Covid 19 and the way it affected economies throughout the world for the next three years?

In 2022, not even the best Pentagon and CIA analysts predicted that Russia would invade Ukraine and disrupt grain markets and raise food prices throughout the world in addition to many other economic impacts. 

Israel, with the best spies, analysts and undercover agents around the world, was taken by surprise by the Hamas attack on October 7, 2023.

Even setting aside these earth shaking events, it is literally impossible to predict the direction of investment markets. Reams of academic research papers have explored this topic and all agree that no one can reliably predict short term investment markets. 

You can't control markets so stick to what you can control: your asset allocation and how much you pay for investing. Choose ultra low cost index mutual funds for your long term goals.

 

Rising share of US wealth held by Americans over 70

Have you seen various Senior discounts at restaurants, theaters, ski resorts, and retailers? These discounts date back to the post WWII era when persons over 65 tended to have low to moderate incomes. This was before Medicare and as Social Security was just beginning to provide benefits for retirees.

 Despite poverty among a small segment of the senior population today, the vast majority of 65+ Americans are wealthy by world and American standards,

Americans ages 70 and older made up 11% of the US population last quarter (2023) but held a record 30% of the country's wealth, according to data from the Federal Reserve. Increases in stocks and home values during the pandemic help to explain the increasing concentration of wealth for members of this demographic.

Across the nation, it is retirees who are fueling the housing markets as they sell paid off homes that appreciated during their long tenure to trade up to more luxurious homes. Sure, some seniors are down-sizing but with developers and builders profiting most from building larger, higher-end homes, many seniors are buying larger homes than where they raised their families.Very few "starter" homes are being built because they are like compact vehicles are to car companies... not profitable. 

The economics of families have shifted over the decades so that people raising children should be getting the discounts, not seniors.

Full Story: Bloomberg

 

Three things you need to know about your student loans

"Going to college is one of the most significant decisions an individual will ever make. There are enormous 

opportunities that come with higher education, but there are also significant costs associated with pursuing a degree. 

Most college students, if not all, need financial assistance to pay for tuition, books, and other fees. This is where 

student loans come in handy."

"Student loans are a type of financial aid that supports students across the globe in achieving their dreams of 

obtaining a college degree. While student loans can be a great resource, they can also become a burden if you don't 

understand how they work. In this blog post, we will share three things you need to know about your student loan 

to make informed decisions and avoid unnecessary debt."

 

e: michael.morris@thesixthdegreemedia.com

w: thesixthdegree.media

1. There are different types of loans
2. What are the interest rates?
3. How will you pay it off?

Get more info on how to Set yourself up for success at: 

https://docs.google.com/document/d/1TAhC0Ewk6v89XACA74ytEhkV4jX_GVjUUzXLxIDJ3f8/edit#heading=h.sombh0tthz8g