I have to say Brendan, I truly appreciate this video and all of the videos that you've been doing. I have a young child and while I've been recently focused on my own debt consolidation/retirement saving, I haven't done nearly as much as I could for my child. With this advice, I'm definitely going to be looking into this. I know this might sound weird, but thank you for quitting your job and making these videos. I've been watching you every day and your advice and explanations are crystal clear for me and put me at ease. I really mean it, I'm so thankful for what you're doing for all of us!
Excellent video 💯. This would certainly be a game changer. Just a few words of caution it's probably best to hold off on taking action for now since: 1) The legislation passed but the IRS still needs to interpret the legislative framework and establish the governing rules. The IRS may have a different interpretation that makes this less appealing. 2) So far it appears the earned income requirement for contributions to Roth IRAs still applies. Meaning, in order to roll money from the 529 plan to a Roth IRA for your child, that child must still have income at least equal to the amount of the roll over; passive income such as dividends and passive rental income do not count as earned income
I believe The last 5 years of contributions can’t be considered for transfer to the Roth and only the total contributions in the first 13 years can be transferred. Not the returns. If invested $7000 upon birth and nothing else, u could only transfer $7000 to the Roth not $35000. I could be mistaken???
Lots of potential yeah! But we aren’t even 100% maxing this out personally, I’m so focused on our own needs over the next 1-2 years plus our own retirement 😆 the kids can figure it out in the end like we all did
$1M at 67 years old is probably going to be like $140K after 67 years of inflation. Its a great kickstart for a roth account though and demonstration to the child/ young adult about the time value of money (compounding). We may well do this with any leftover 529 funds, and/or let it compound and transfer to their kids after another 30 years for our future grandkids college costs
Wow, almost sounds too good to be true! What if your kid decides to go to college as you're building this 529 for them? Are you allowed to leave this 529 'untouched' solely for transferring to a Roth IRA for them, or are they required to use the 529 funds to pay for their college?
I think you could spend some time in an investment calculator and figure it out. Depends on how much you want for education plus retirement. You could set the duration for 18 years - child’s current age and throw in different amounts to see what total amount you have to work with. Could also be a decision you make with the child if you want. Ok Johnny you can either go to school and work during the summers and have $0 for the future or you can work during school and have $25k for the future etc…
@@BrendanEvan it's definitely got me thinking over the options! Our kid is pretty young still but trying to think how to jumpstart this or accomplish both goals. Like a lump sum of $1.5-$2K now at age 2 and then $100-$150/month contribution. Even with conservative percentages it's close to $50k.
an IRA for a child requires them to work. An UGMA/UTMA has the downside that the child gets the money at majority and they might blow it on a useless Plumba or something. This is a neat thing. (You still shouldn't overfund the 529, though).
The same way, just push back the year ranges by 8. So if you start now the money has 10 years minimum to grow before they hit college. If you want to hit the $35k limit be the time you can roll it over you’d need to contribute a bit more. If you know it’s for retirement the main timeline factor is the 15 years so they’d be around 23 before you could start transferring to the Roth IRA. Still massively beneficial regardless of the education choices.
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I have to say Brendan, I truly appreciate this video and all of the videos that you've been doing. I have a young child and while I've been recently focused on my own debt consolidation/retirement saving, I haven't done nearly as much as I could for my child. With this advice, I'm definitely going to be looking into this. I know this might sound weird, but thank you for quitting your job and making these videos. I've been watching you every day and your advice and explanations are crystal clear for me and put me at ease. I really mean it, I'm so thankful for what you're doing for all of us!
Excellent video 💯. This would certainly be a game changer. Just a few words of caution it's probably best to hold off on taking action for now since:
1) The legislation passed but the IRS still needs to interpret the legislative framework and establish the governing rules. The IRS may have a different interpretation that makes this less appealing.
2) So far it appears the earned income requirement for contributions to Roth IRAs still applies. Meaning, in order to roll money from the 529 plan to a Roth IRA for your child, that child must still have income at least equal to the amount of the roll over; passive income such as dividends and passive rental income do not count as earned income
@@BlackSwanFinancial thanks! We will have to see what details change in the future, but for now I still like the option! 👍
THANK YOU for posting this update to the 529 account!
👍
Wow I will be digging into this, thank you!
Great! Thanks for watching! Crazy isn’t it!?
I believe The last 5 years of contributions can’t be considered for transfer to the Roth and only the total contributions in the first 13 years can be transferred. Not the returns. If invested $7000 upon birth and nothing else, u could only transfer $7000 to the Roth not $35000. I could be mistaken???
Man.. our kids are so damn lucky I wish I was them 😂
Lots of potential yeah! But we aren’t even 100% maxing this out personally, I’m so focused on our own needs over the next 1-2 years plus our own retirement 😆 the kids can figure it out in the end like we all did
$1M at 67 years old is probably going to be like $140K after 67 years of inflation. Its a great kickstart for a roth account though and demonstration to the child/ young adult about the time value of money (compounding). We may well do this with any leftover 529 funds, and/or let it compound and transfer to their kids after another 30 years for our future grandkids college costs
Yeah if it’s not enough for you then just invest more today 👍
Pretty exciting to do the math any case 🤓🧮
Wow, almost sounds too good to be true! What if your kid decides to go to college as you're building this 529 for them? Are you allowed to leave this 529 'untouched' solely for transferring to a Roth IRA for them, or are they required to use the 529 funds to pay for their college?
Good question! And yes you can leave it alone so it grows if you want! Definitely aren’t required to use the funds if you don’t want to.
I love your videos! ❤ is savings account tax free?
Thanks! Yes the account grows tax free!
Do you have a video on starting at Roth for your kids though m1?
No, I haven’t made one. But do your kids have legit earned income? That’s reported to the IRS?
What would be your recommendation with kids a little older would a custodial account be a better option?
Whatever you like for your situation 👍
Personally I don’t plan on opening another one
I thought you could only transfer 35k only for this to go into a roth
Yes that’s the current max
@@BrendanEvan ok makes sense. The large amount is the compounded growth
I wonder what a reasonable amount would be if we're counting on the 529 for education expenses but also want to set up for the retirement
I think you could spend some time in an investment calculator and figure it out.
Depends on how much you want for education plus retirement.
You could set the duration for 18 years - child’s current age and throw in different amounts to see what total amount you have to work with.
Could also be a decision you make with the child if you want.
Ok Johnny you can either go to school and work during the summers and have $0 for the future or you can work during school and have $25k for the future etc…
@@BrendanEvan it's definitely got me thinking over the options! Our kid is pretty young still but trying to think how to jumpstart this or accomplish both goals. Like a lump sum of $1.5-$2K now at age 2 and then $100-$150/month contribution. Even with conservative percentages it's close to $50k.
an IRA for a child requires them to work. An UGMA/UTMA has the downside that the child gets the money at majority and they might blow it on a useless Plumba or something. This is a neat thing. (You still shouldn't overfund the 529, though).
That’s why this loophole is so cool, they don’t need to work! I’m not against them working though. Actually plan on encouraging our kids to work
@@BrendanEvanso shouldn't sell, uh...lease the kid to the sweat shop while under 18.
Depends on the pay rate of the burritos and racecars in the work agreement
What happens if our kids are around 8 how would it work
The same way, just push back the year ranges by 8. So if you start now the money has 10 years minimum to grow before they hit college. If you want to hit the $35k limit be the time you can roll it over you’d need to contribute a bit more.
If you know it’s for retirement the main timeline factor is the 15 years so they’d be around 23 before you could start transferring to the Roth IRA. Still massively beneficial regardless of the education choices.