Personal Finance Advice and Education! (3 Viewers)

[jm192]

Cool personal note, the 401K check showed up in the mail yesterday. Going to upload it to Fidelity and that's another account we don't have to think about.

At one point, we had:

My 401K: Schwab
My 2nd 401K and Roth: Fidelity
Wife's 401K: Prudential
Wife's Roth and Taxable brokerage Account: Vanguard
HSA $$ account: HSA Bank
HSA Investment account: TD Ameritrade (which became Schwab)
2nd HSA: Health Equity

Now it's down to:
Fidelity for my 401K, All HSA$, Roth
Vanguard for her Roth, Taxable brokerage
Prudential for her 401K.

 

[Orange&Blue]

Have a couple of questions

I work for the government. Wife owns an LLC but doesn't earn much. Combined we have $1.1M in 401(k), IRA, and brokerage account. Brokerage is $300k with $150k cost basis.

I plan to retire in 17 years if not sooner. I would draw FERS pension and SS. Wife probably wouldn't get much as she doesn't pay into it.

We have 3 kids with oldest about to be a junior. Oldest kid has 529s valued at $65k.

We have a house on a 30yr note (3.5%, $125k principal left, value $400k) that we don't intend to sell anytime soon.

No other debt.

My questions:
1) Due to a death in the family, we are now joint owners of a house in Nashville. Principal remaining is $325k and valued at 500k. 12 years left on the 15 year note. Joint owner wants to rent for sentimental reasons. I want whatever is best financially. We would need a management company as neither live close.

My concern is that this will really screw my oldest on any financial assistance. Thoughts on what to do?

2) I've been thinking of maxing out my 401(k) and selling from brokerage to make up for living expenses. Would help reduce FAFSA impact but not sure the overall positive gains are worth the financial hit of 15% capital gains. Thoughts?

3) Since wife is sole proprietor of her LLC, can we move money from the brokerage to fund her 401(k)?

 

[gianmarco]

Btw, I don't remember seeing that new i-bond rate discussed.

Currently a pretty strong 1.1% fixed rate and a combined rate of 3.98%.

That's not much lower than my current HYSA rate and a solid fixed rate for the future.

I go back and forth on it.

I've always said if we got any real fixed rate, I'd be in. My hangup: As you said, HYSA (and even money market accounts) are running similar to slightly better. Obviously, the I-bonds require a 1 year wait until you can redeem. Money market funds and HYSA don't have the liquidity issues.

My other thought: Being 25-30 years from retirement: Do I just want to throw that money into stocks and go for a higher return?

Finally, Thinking out loud: It seems like at times, that 1% is going to add substantial value. But at other times, you're going to be giving up better returns to buy into/hold onto that 1%.

Just another tool in diversification. Like you said, at times it will underperform, other times it will outperform.

Not a bad place to sock away some funds that can be both semi-short term but also be long term if you don't need and the landscape changes.

 

[-OZ-]

Being 25-30 years from retirement: Do I just want to throw that money into stocks and go for a higher return?

Is retirement the only purpose for these funds?

The only bonds, including I bonds, we own have a much shorter target. Their purpose is 1-15 years out, although we might keep them longer if we don’t have any emergencies, the markets don’t fall our first years in retirement and we decide to not buy the lake house (or use these funds for that).

If your only purpose of the I bonds is 25+ years away, I wouldn’t buy them. They’re not a great way to rebalance a portfolio, so I wouldn’t use them for that purpose if you want a 90/10 - just go 10% BND, SGOV, TLT… etc (I’m not sure which is best but SGOV is almost like cash)

 

[-OZ-]

max out our IRAs (Roth first than traditional

Explain please. You don’t get to Max both.

 

[Orange&Blue]

max out our IRAs (Roth first than traditional

Explain please. You don’t get to Max both.

you are right. i conflated IRAs and 401(k).

edited my post

 

[Sand]

1) Due to a death in the family, we are now joint owners of a house in Nashville. Principal remaining is $325k and valued at 500k. 12 years left on the 15 year note. Joint owner wants to rent for sentimental reasons. I want whatever is best financially. We would need a management company as neither live close.

IMO, someone should rent ten houses or zero. This is a huge PIA. Sell it. Simplify, simplify, simplify.

2) I've been thinking of maxing out my 401(k) and selling from brokerage to make up for living expenses. Would help reduce FAFSA impact but not sure the overall positive gains are worth the financial hit of 15% capital gains. Thoughts?

Monies in a taxable account give you flexibility. Maybe start stuffing monies into a Roth or, even better, an HSA (since you're govt. maybe an HSA isn't possible) than more into pre-tax accounts? Not sure how much it will move the FAFSA needle. Maybe run some scenarios and see if it matters.

3) Since wife is sole proprietor of her LLC, can we move money from the brokerage to fund her 401(k)?

Sounds reasonable, but monetary flexibility is worth something.

 

[Peggy]

Using cash, brokerage, savings whatever to pay yourself so you can use the paycheck to funnel money into tax sheltered accounts is a no-brainer. Don't over think it, just do it why you have the means to

 

[Orange&Blue]

1) Due to a death in the family, we are now joint owners of a house in Nashville. Principal remaining is $325k and valued at 500k. 12 years left on the 15 year note. Joint owner wants to rent for sentimental reasons. I want whatever is best financially. We would need a management company as neither live close.

IMO, someone should rent ten houses or zero. This is a huge PIA. Sell it. Simplify, simplify, simplify.

2) I've been thinking of maxing out my 401(k) and selling from brokerage to make up for living expenses. Would help reduce FAFSA impact but not sure the overall positive gains are worth the financial hit of 15% capital gains. Thoughts?

Monies in a taxable account give you flexibility. Maybe start stuffing monies into a Roth or, even better, an HSA (since you're govt. maybe an HSA isn't possible) than more into pre-tax accounts? Not sure how much it will move the FAFSA needle. Maybe run some scenarios and see if it matters.

3) Since wife is sole proprietor of her LLC, can we move money from the brokerage to fund her 401(k)?

Sounds reasonable, but monetary flexibility is worth something.

apparently you can only do up to 25% of the companies gross income.

 

[jm192]

401K landed on Fidleity. It's finally all done. Investments consolidated down to Fidelity, Vanguard, and her 401K on Prudential. And I-bonds, but those are zero monitoring/effort once you've bought them.

I'm a few purchases away from being able to start DCA'ing into the taxable account. We're getting a deck built for our above ground pool. And then we plan to get new living room furniture. We have quite a bit in savings/checking, but want to figure out what's left after those purchases.

 

[Sand]

This seems to be the right place for this since the bill is now law. A good breakdown of the OBBB provisions. Big changes for seniors (time limited good ones), changes to the ACA, changes to charitable donations, etc.

Tax provisions in the One Big Beautiful Bill Act

The bill extends portions of the Tax Cuts and Jobs Act, provides deductions to eliminate income taxes on certain tips and overtime pay, and addresses other tax priorities of the Trump administration.

www.thetaxadviser.com

 

[Peggy]

This seems to be the right place for this since the bill is now law. A good breakdown of the OBBB provisions. Big changes for seniors (time limited good ones), changes to the ACA, changes to charitable donations, etc.

Tax provisions in the One Big Beautiful Bill Act

The bill extends portions of the Tax Cuts and Jobs Act, provides deductions to eliminate income taxes on certain tips and overtime pay, and addresses other tax priorities of the Trump administration.

www.thetaxadviser.com

Thanks, was looking for a good summary. The big ones for me: TCJA tax bracket made permanent and TCJA standard deduction made permanent. I'd like to see the SS deduction made permanent or eliminate taxes on SS all together. Wonder if they'll try again in 2028. Nothing else affects me much.

 

[Sand]

This seems to be the right place for this since the bill is now law. A good breakdown of the OBBB provisions. Big changes for seniors (time limited good ones), changes to the ACA, changes to charitable donations, etc.

Tax provisions in the One Big Beautiful Bill Act

The bill extends portions of the Tax Cuts and Jobs Act, provides deductions to eliminate income taxes on certain tips and overtime pay, and addresses other tax priorities of the Trump administration.

www.thetaxadviser.com

Thanks, was looking for a good summary. The big ones for me: TCJA tax bracket made permanent and TCJA standard deduction made permanent. I'd like to see the SS deduction made permanent or eliminate taxes on SS all together. Wonder if they'll try again in 2028. Nothing else affects me much.

Good article on what this bill did for taxation of SS.

Social Security Is Still Taxed Under the New 2025 Trump Tax Law

The new 2025 Trump tax law doesn't eliminate federal income tax on Social Security benefits. Social Security is still taxable just as before.

thefinancebuff.com

 

[NutterButter]

Extra savings were going into VTI in my brokerage account. Future money is going into a MMF. Not selling or changing retirement account mixes, but more liquidity will help me sleep at night. Cutting expenses for the near term as well.

Sure feels like the market upside is really low right now and the market downside is really high. Like SP500 could be at max +5%, but also -15% or worse.

Really should have listened to my own advice here. Instead, I'm riding it doooooooown.

Tariffs threatening to make a comeback on Aug 1. What are you feeling this time?

 

[kupcho1]

Tariffs threatening to make a comeback on Aug 1. What are you feeling this time?

I could go for a TACO.

 

[kupcho1]

Tariffs threatening to make a comeback on Aug 1. What are you feeling this time?

I could go for a TACO.

Yummy
Can't wait for the next TACO in August.

 

[Chemical X]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

 

[Peggy]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

 

[Chemical X]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

 

[Nugget]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

I’d pull out the funds when you need them. If you are at a marginal tax rate now that is lower than you would be in the future, I’d do Roth Conversions up to that next level. I would not use the amount being withheld as a factor in the decision.

 

[Chemical X]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

I’d pull out the funds when you need them. If you are at a marginal tax rate now that is lower than you would be in the future, I’d do Roth Conversions up to that next level. I would not use the amount being withheld as a factor in the decision.

so, i have an existing Roth IRA. with wife’s income i have to be at a higher rate now, no? theoretically, instead of pulling out x amount and paying taxes on it, you are saying i should convert the portion i want from regular to roth, pay the income taxes now and let that money accumulate free?

 

[Peggy]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

It is because it's tax defered. Gains compound over and over and it only counts as income when you eventually cash out. We spend a lot of effort getting every penny we can into retirement accounts, then lose a big part of that ability when you no longer have a paycheck, so you don't want to take them out until you absolutely need to.

And yes using it as income when the time comes you want to be in as low a tax bracket as possible. It's all about tax avoidance, and that includes pushing deferred accounts out out in time cashing only when you need at a low tax bracket.

Paying tax and converting to a Roth is a very good idea if and when you're in a low tax bracket.

 

[Chemical X]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

It is because it's tax defered. Gains compound over and over and it only counts as income when you eventually cash out. We spend a lot of effort getting every penny we can into retirement accounts, then lose a big part of that ability when you no longer have a paycheck, so you don't want to take them out until you absolutely need to.

And yes using it as income when the time comes you want to be in as low a tax bracket as possible. It's all about tax avoidance, and that includes pushing deferred accounts out out in time cashing only when you need at a low tax bracket.

Paying tax and converting to a Roth is a very good idea if and when you're in a low tax bracket.

so, better to wait for my marginal tax rate to be 12% rather than 24%?

 

[Peggy]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

I’d pull out the funds when you need them. If you are at a marginal tax rate now that is lower than you would be in the future, I’d do Roth Conversions up to that next level. I would not use the amount being withheld as a factor in the decision.

so, i have an existing Roth IRA. with wife’s income i have to be at a higher rate now, no? theoretically, instead of pulling out x amount and paying taxes on it, you are saying i should convert the portion i want from regular to roth, pay the income taxes now and let that money accumulate free?

Is wife retiring soon? If so wait until the year after you're both retired, look at the tax brackets and see how much. If you have zero other income you can convert $96,000 before you jump up to the 22% tax bracket. Pay your 11.5% on that and it will be all tax free from then on out. If you're living good you can make 11% up in a single year invested.

That's what I'm going to start doing next year. Rinse and repeat every year until RMDs kick in to minimize their effect as much as I can.

You have to be careful of some other things though like ACA subsidies that have income limits too.

 

[Peggy]

here’s a question i think i know the answer to, but i want to spitball. finished working a year ago and this year i hit the dreaded 59.5, an interesting 1/2 birfday since i can now access retirement monies penalty free. i worked half year 2024, wife has same job, same salary. filed our taxes and fed refund was aboot 10k. i use turbo tax. essentially, i reran the program removing my w2 and our refund increased. my goal is to -0- out at year end, no pay and no refund. am i right to think i should take non roth retirement funds during 2025 equal to an amount that will reduce that tax refund down to -0-? in this way i am offsetting taxable income that may occur when our or her income is less or nil?

edit to say i will reinvest these funds into mutuals i already have at vanguard.

I dont think so. Without knowing a bunch more specifics it sounds like you're trying to up your income to pay more taxes so you don't get a refund. That's the opposite of what you want to do.

Unless you're doing a 401k or IRA rollover to Roth. That way you'd be using the money the govmt owes you to pay the tax now and get it into Roth and eventually pay less taxes in the long run. It is a 100% tax avoidance adventure from here on out.

Since you said you don't need the money (would be reinvesting) I would not take it out of a retirement (tax sheltered) account. The goal is to keep those accounts invested as long as possible. I'd take the biggest refund I could get and invest that before taking stuff out of a retirement account.

but if the account isn’t a Roth, it’s not tax sheltered, or is it? have i been looking at it wrong? no matter when i pull it, i am responsible for taxes, no? or is a simple matter of i am in better shape tax wise to pull it when neither of us are working?

It is because it's tax defered. Gains compound over and over and it only counts as income when you eventually cash out. We spend a lot of effort getting every penny we can into retirement accounts, then lose a big part of that ability when you no longer have a paycheck, so you don't want to take them out until you absolutely need to.

And yes using it as income when the time comes you want to be in as low a tax bracket as possible. It's all about tax avoidance, and that includes pushing deferred accounts out out in time cashing only when you need at a low tax bracket.

Paying tax and converting to a Roth is a very good idea if and when you're in a low tax bracket.

so, better to wait for my marginal tax rate to be 12% rather than 24%?

BINGO. see above

 

[Sand]

Deep article on the OBBB. Lots of stuff in there not talked about much (like AMT changes). You'll need a few cups of coffee to consume the whole thing.

Breaking Down The “One Big Beautiful Bill Act” (OBBBA)

Analyzing tax planning implications of the "One Big Beautiful Bill Act" (OBBBA), signed into law on July 4, 2025, following sunset of the Tax Cuts and Jobs Act.

www.kitces.com

 

[The Z Machine]

@Chemical X , what does health insurance look like for you and your wife retired in Italy? What will you do about Medicare coverage once you hit that age?

 

[Peggy]

Deep article on the OBBB. Lots of stuff in there not talked about much (like AMT changes). You'll need a few cups of coffee to consume the whole thing.

Breaking Down The “One Big Beautiful Bill Act” (OBBBA)

Analyzing tax planning implications of the "One Big Beautiful Bill Act" (OBBBA), signed into law on July 4, 2025, following sunset of the Tax Cuts and Jobs Act.

www.kitces.com

 

[Nugget]

Lots of value in this thread - currently reading up on 72(t) and rule of 55 and using both to tap retirement savings before 55. Not sure if it is possible for me, as health care still seems to be the wild card, but having the option seems nice.

 

[Sand]

Lots of value in this thread - currently reading up on 72(t) and rule of 55 and using both to tap retirement savings before 55. Not sure if it is possible for me, as health care still seems to be the wild card, but having the option seems nice.

Another reading assignment: https://www.reddit.com/r/Fire/comments/1lttnnh/reconciliation_billobbba_megathread_please_direct/

In particular, look at the first reply that goes through Bronze Plans and all being treated as HSAs. You can perform all kinds of shenanigans to stay under the 400% FPL limit using this. The OBBB did early retirement folks a solid.

 

[Chemical X]

@Chemical X , what does health insurance look like for you and your wife retired in Italy? What will you do about Medicare coverage once you hit that age?

so, with my wife still working, we have a BCBS plan with High Dedictible in the states. here, we are in the national system as of 1/1, we paid an annual fee based on income and we are now fully covered for just about everything in the system. if we decide to go private, outside the system for a specialist, like an orthopedist, it’s been around €60 for an appointment.

 

[Peggy]

Lots of value in this thread - currently reading up on 72(t) and rule of 55 and using both to tap retirement savings before 55. Not sure if it is possible for me, as health care still seems to be the wild card, but having the option seems nice.

Another reading assignment: https://www.reddit.com/r/Fire/comments/1lttnnh/reconciliation_billobbba_megathread_please_direct/

In particular, look at the first reply that goes through Bronze Plans and all being treated as HSAs. You can perform all kinds of shenanigans to stay under the 400% FPL limit using this. The OBBB did early retirement folks a solid.

Yep. Double the amount didn't make it though.

 

[Peggy]

Apologies because I know the word "Trump" isn't allowed on this forum, but, it's in the name: Trump Fund.

Imagine being able to put 5K a year into a Roth for the first 18 years of your kids life.

Then imagine them not doing anything with it, just let it sit there for 30 or 40 years until they retire.

Put that in into a compound interest calculator- I dare you.

WOW

 

[Nugget]

Apologies because I know the word "Trump" isn't allowed on this forum, but, it's in the name: Trump Fund.

Imagine being able to put 5K a year into a Roth for the first 18 years of your kids life.

Then imagine them not doing anything with it, just let it sit there for 30 or 40 years until they retire.

Put that in into a compound interest calculator- I dare you.

WOW

It isn’t a Roth. Withdrawals would be taxed as ordinary income. It is funded with after tax money. I’m not sure it wouldn’t be better off in a brokerage account so that the kid in 40 years could pay cap gains taxes instead.

 

[Sand]

Apologies because I know the word "Trump" isn't allowed on this forum, but, it's in the name: Trump Fund.

Imagine being able to put 5K a year into a Roth for the first 18 years of your kids life.

Then imagine them not doing anything with it, just let it sit there for 30 or 40 years until they retire.

Put that in into a compound interest calculator- I dare you.

WOW

It isn’t a Roth. Withdrawals would be taxed as ordinary income. It is funded with after tax money. I’m not sure it wouldn’t be better off in a brokerage account so that the kid in 40 years could pay cap gains taxes instead.

So double taxed? Eeesh.

 

[Peggy]

Apologies because I know the word "Trump" isn't allowed on this forum, but, it's in the name: Trump Fund.

Imagine being able to put 5K a year into a Roth for the first 18 years of your kids life.

Then imagine them not doing anything with it, just let it sit there for 30 or 40 years until they retire.

Put that in into a compound interest calculator- I dare you.

WOW

It isn’t a Roth. Withdrawals would be taxed as ordinary income. It is funded with after tax money. I’m not sure it wouldn’t be better off in a brokerage account so that the kid in 40 years could pay cap gains taxes instead.

So double taxed? Eeesh.

Hmmm. I must have read that too quickly. Sand's link says "Withdrawals of direct contributions tax free. Growth and excluded contributions are taxed" I've also read that it's taxed at capital gains rate. https://www.pbs.org/newshour/politics/what-experts-think-about-the-1000-trump-accounts-for-babies

Distributions are taxed at the capital gains rate.

Says you can roll it over to a 529 at age 18, unclear if you can convert to Roth.

At any rate it gets around the requirements to have income in order to contribute to an IRA type account.

 

[Peggy]

Everything I'm reading says it turns into a regular IRA type account. It wouldn't be double taxed if the contributions were after tax money. And if you're able to roll it to a Roth at 18, (why wouldn't you?), it would be at the lowest tax bracket of their life at age 18.

 

[Nugget]

Everything I'm reading says it turns into a regular IRA type account. It wouldn't be double taxed if the contributions were after tax money. And if you're able to roll it to a Roth at 18, (why wouldn't you?), it would be at the lowest tax bracket of their life at age 18.

CNBC Link on Baby Bonus

If I had a kid in this short time frame, sign me up for the free $1k. If my employer wants to donate, go for it.

Looks like 529s that convert later in life if not used we be a better way to get rich parents and grandparents to funnel money to the next generation.

In general I support the idea of a baby bond. This version just doesn't seem well thought out.

 

[Instinctive]

Apologies because I know the word "Trump" isn't allowed on this forum, but, it's in the name: Trump Fund.

Imagine being able to put 5K a year into a Roth for the first 18 years of your kids life.

Then imagine them not doing anything with it, just let it sit there for 30 or 40 years until they retire.

Put that in into a compound interest calculator- I dare you.

WOW

As someone with a 17 month and a 7 month old, this is very intriguing. Will need to research it.

 

[Desert_Power]

Looks like 529s that convert later in life if not used we be a better way to get rich parents and grandparents to funnel money to the next generation.

In general I support the idea of a baby bond. This version just doesn't seem well thought out.

 

[Peggy]

Everything I'm reading says it turns into a regular IRA type account. It wouldn't be double taxed if the contributions were after tax money. And if you're able to roll it to a Roth at 18, (why wouldn't you?), it would be at the lowest tax bracket of their life at age 18.

CNBC Link on Baby Bonus

If I had a kid in this short time frame, sign me up for the free $1k. If my employer wants to donate, go for it.

Looks like 529s that convert later in life if not used we be a better way to get rich parents and grandparents to funnel money to the next generation.

In general I support the idea of a baby bond. This version just doesn't seem well thought out.

The 529 is better because its 38K per year. But if we're talking for retirement 529 rollover is 7K per year. This adds on another 5K from the get go and theoretically all converts at age 18.

Agree it could be better thought out, but, its not insignificant.

 

[Sand]

The Baby Bonus thing is annoying. Not because it's a bad idea to give kids a long runway to save, but because it seems the damn govt. has to increase complexity at every turn. They have found yet another tax permutation to inflict on us - we're now up to 6 (I think). Traditional IRA/401k, Roth, Inherited IRA, 529, HSA, Baby Bonus. So flipping odd to make up yet another classification just for this.

 

[Runkle]

I'm just patiently waiting for my HSA to not be taxed

:grumbles in californian:

 

[Peggy]

The Baby Bonus thing is annoying. Not because it's a bad idea to give kids a long runway to save, but because it seems the damn govt. has to increase complexity at every turn. They have found yet another tax permutation to inflict on us - we're now up to 6 (I think). Traditional IRA/401k, Roth, Inherited IRA, 529, HSA, Baby Bonus. So flipping odd to make up yet another classification just for this.

So instead you'd put it under the IRA and make special rules for children? That's a distinction without a difference really.

 

[Sand]

Ok, maybe the Baby Bonus isn't at capital gains rates, but treated as income on the way out. Found a good article that goes into it:

Creation of “Trump” savings accounts for individuals under 18 Effective: 2026, no end date. This is a wild one and I frankly can’t quite fully follow it or figure it out. There is a lot going on here, and I’m guessing there will be a lot of clarifications from the IRS about this before all of the details and implementation facts are known with certainty. But, to sum up, it appears the OBBBA is establishing an IRA-like account called a “Trump” savings account intended to be used as a savings vehicle for children under 18, where the funding of the account can only occur while the child is under 18. And then distributions from it will follow normal distribution rules for IRAs.

While this means these accounts aren’t going to directly benefit most of you reading this, they may nonetheless be opened by many of you on behalf of children or grand children. Contributions to Trump accounts won’t be allowed until one year after the enactment of the OBBBA, or July 4, 2026. After that, contributions will be allowed up until the calendar year in which the account beneficiary turns 18. The maximum annual contribution is $5,000 (inflation adjusted after 2027),and there will not be any tax deferral or deductions on contributions.

The government will be making $1,000 contributions per year to every child born from 2025 through 2028.And it appears the government will be automatically opening accounts for children born in those years. Investment options for Trump accounts will be limited to index exchange traded funds (“ETFs”) or mutual funds whose expense ratios are not more than 0.1% per year. Distributions are not allowed (at all, I think) until the year the beneficiary turns 18. And after that, it appears the distribution rules around Trump accounts are the same as normal IRAs; a 10% penalty on withdrawals before age 59 ½ (unless there is a penalty exception; just like with IRAs), otherwise, all distributions will be treated like normal IRA distributions where earnings are taxed as ordinary income and return of “basis” or contributions will be tax-free.

Yes, this means there will proration calculations that will need to be tracked, to keep tabs on how much basis there is in each Trump account vs how much growth/earnings. And the basis tracking of Trump accounts will be separate from basis tracking of actual/traditional IRAs the person may have. This whole Trump account things seems messy so far and without much real benefit, in my opinion. But maybe I’m missing something. Stay tuned for additional details as they become more clear.

https://static.twentyoverten.com/5d252702a03bfb38f263a72e/-TZkebSfIjk/Tenon-Financial-Newsletter-OBBBA-20250707.pdf

 

[-OZ-]

Might regret it but just moved to 90/10 from 97/3 (stocks/bonds), 1/3 of stocks are international. Basically 3 years of expenses (after the pension) are in bonds now.

 

[brun]

Ok, maybe the Baby Bonus isn't at capital gains rates, but treated as income on the way out. Found a good article that goes into it:

Creation of “Trump” savings accounts for individuals under 18 Effective: 2026, no end date. This is a wild one and I frankly can’t quite fully follow it or figure it out. There is a lot going on here, and I’m guessing there will be a lot of clarifications from the IRS about this before all of the details and implementation facts are known with certainty. But, to sum up, it appears the OBBBA is establishing an IRA-like account called a “Trump” savings account intended to be used as a savings vehicle for children under 18, where the funding of the account can only occur while the child is under 18. And then distributions from it will follow normal distribution rules for IRAs.

While this means these accounts aren’t going to directly benefit most of you reading this, they may nonetheless be opened by many of you on behalf of children or grand children. Contributions to Trump accounts won’t be allowed until one year after the enactment of the OBBBA, or July 4, 2026. After that, contributions will be allowed up until the calendar year in which the account beneficiary turns 18. The maximum annual contribution is $5,000 (inflation adjusted after 2027),and there will not be any tax deferral or deductions on contributions.

The government will be making $1,000 contributions per year to every child born from 2025 through 2028.And it appears the government will be automatically opening accounts for children born in those years. Investment options for Trump accounts will be limited to index exchange traded funds (“ETFs”) or mutual funds whose expense ratios are not more than 0.1% per year. Distributions are not allowed (at all, I think) until the year the beneficiary turns 18. And after that, it appears the distribution rules around Trump accounts are the same as normal IRAs; a 10% penalty on withdrawals before age 59 ½ (unless there is a penalty exception; just like with IRAs), otherwise, all distributions will be treated like normal IRA distributions where earnings are taxed as ordinary income and return of “basis” or contributions will be tax-free...

Maybe I'm not understanding this correctly. It sounds like contributions are post tax like a Roth IRA. Upon distribution, typically after 59 1/2, earnings are taxed like a traditional IRA. Investment options are limited. Other than a potential $3k over 3 years per kid, from the government. What's the big deal?

 

[Sand]

Ok, maybe the Baby Bonus isn't at capital gains rates, but treated as income on the way out. Found a good article that goes into it:

Creation of “Trump” savings accounts for individuals under 18 Effective: 2026, no end date. This is a wild one and I frankly can’t quite fully follow it or figure it out. There is a lot going on here, and I’m guessing there will be a lot of clarifications from the IRS about this before all of the details and implementation facts are known with certainty. But, to sum up, it appears the OBBBA is establishing an IRA-like account called a “Trump” savings account intended to be used as a savings vehicle for children under 18, where the funding of the account can only occur while the child is under 18. And then distributions from it will follow normal distribution rules for IRAs.

While this means these accounts aren’t going to directly benefit most of you reading this, they may nonetheless be opened by many of you on behalf of children or grand children. Contributions to Trump accounts won’t be allowed until one year after the enactment of the OBBBA, or July 4, 2026. After that, contributions will be allowed up until the calendar year in which the account beneficiary turns 18. The maximum annual contribution is $5,000 (inflation adjusted after 2027),and there will not be any tax deferral or deductions on contributions.

The government will be making $1,000 contributions per year to every child born from 2025 through 2028.And it appears the government will be automatically opening accounts for children born in those years. Investment options for Trump accounts will be limited to index exchange traded funds (“ETFs”) or mutual funds whose expense ratios are not more than 0.1% per year. Distributions are not allowed (at all, I think) until the year the beneficiary turns 18. And after that, it appears the distribution rules around Trump accounts are the same as normal IRAs; a 10% penalty on withdrawals before age 59 ½ (unless there is a penalty exception; just like with IRAs), otherwise, all distributions will be treated like normal IRA distributions where earnings are taxed as ordinary income and return of “basis” or contributions will be tax-free...

Maybe I'm not understanding this correctly. It sounds like contributions are post tax like a Roth IRA. Upon distribution, typically after 59 1/2, earnings are taxed like a traditional IRA. Investment options are limited. Other than a potential $3k over 3 years per kid, from the government. What's the big deal?

IMO, it's not other than the free 1k per kid.

 

[Peggy]

Ok, maybe the Baby Bonus isn't at capital gains rates, but treated as income on the way out. Found a good article that goes into it:

Creation of “Trump” savings accounts for individuals under 18 Effective: 2026, no end date. This is a wild one and I frankly can’t quite fully follow it or figure it out. There is a lot going on here, and I’m guessing there will be a lot of clarifications from the IRS about this before all of the details and implementation facts are known with certainty. But, to sum up, it appears the OBBBA is establishing an IRA-like account called a “Trump” savings account intended to be used as a savings vehicle for children under 18, where the funding of the account can only occur while the child is under 18. And then distributions from it will follow normal distribution rules for IRAs.

While this means these accounts aren’t going to directly benefit most of you reading this, they may nonetheless be opened by many of you on behalf of children or grand children. Contributions to Trump accounts won’t be allowed until one year after the enactment of the OBBBA, or July 4, 2026. After that, contributions will be allowed up until the calendar year in which the account beneficiary turns 18. The maximum annual contribution is $5,000 (inflation adjusted after 2027),and there will not be any tax deferral or deductions on contributions.

The government will be making $1,000 contributions per year to every child born from 2025 through 2028.And it appears the government will be automatically opening accounts for children born in those years. Investment options for Trump accounts will be limited to index exchange traded funds (“ETFs”) or mutual funds whose expense ratios are not more than 0.1% per year. Distributions are not allowed (at all, I think) until the year the beneficiary turns 18. And after that, it appears the distribution rules around Trump accounts are the same as normal IRAs; a 10% penalty on withdrawals before age 59 ½ (unless there is a penalty exception; just like with IRAs), otherwise, all distributions will be treated like normal IRA distributions where earnings are taxed as ordinary income and return of “basis” or contributions will be tax-free...

Maybe I'm not understanding this correctly. It sounds like contributions are post tax like a Roth IRA. Upon distribution, typically after 59 1/2, earnings are taxed like a traditional IRA. Investment options are limited. Other than a potential $3k over 3 years per kid, from the government. What's the big deal?

Doesn't require earnings to contribute to the "IRA" which you wouldn't have as a child or a retired grandparent giving money to the child.

Also the ability to get it earlier than 59.5 without penalty (don't remember the specifics).

 

[matttyl]

Ok, maybe the Baby Bonus isn't at capital gains rates, but treated as income on the way out. Found a good article that goes into it:

Creation of “Trump” savings accounts for individuals under 18 Effective: 2026, no end date. This is a wild one and I frankly can’t quite fully follow it or figure it out. There is a lot going on here, and I’m guessing there will be a lot of clarifications from the IRS about this before all of the details and implementation facts are known with certainty. But, to sum up, it appears the OBBBA is establishing an IRA-like account called a “Trump” savings account intended to be used as a savings vehicle for children under 18, where the funding of the account can only occur while the child is under 18. And then distributions from it will follow normal distribution rules for IRAs.

While this means these accounts aren’t going to directly benefit most of you reading this, they may nonetheless be opened by many of you on behalf of children or grand children. Contributions to Trump accounts won’t be allowed until one year after the enactment of the OBBBA, or July 4, 2026. After that, contributions will be allowed up until the calendar year in which the account beneficiary turns 18. The maximum annual contribution is $5,000 (inflation adjusted after 2027),and there will not be any tax deferral or deductions on contributions.

The government will be making $1,000 contributions per year to every child born from 2025 through 2028.And it appears the government will be automatically opening accounts for children born in those years. Investment options for Trump accounts will be limited to index exchange traded funds (“ETFs”) or mutual funds whose expense ratios are not more than 0.1% per year. Distributions are not allowed (at all, I think) until the year the beneficiary turns 18. And after that, it appears the distribution rules around Trump accounts are the same as normal IRAs; a 10% penalty on withdrawals before age 59 ½ (unless there is a penalty exception; just like with IRAs), otherwise, all distributions will be treated like normal IRA distributions where earnings are taxed as ordinary income and return of “basis” or contributions will be tax-free...

Maybe I'm not understanding this correctly. It sounds like contributions are post tax like a Roth IRA. Upon distribution, typically after 59 1/2, earnings are taxed like a traditional IRA. Investment options are limited. Other than a potential $3k over 3 years per kid, from the government. What's the big deal?

Doesn't require earnings to contribute to the "IRA" which you wouldn't have as a child or a retired grandparent giving money to the child.

Also the ability to get it earlier than 59.5 without penalty (don't remember the specifics).

Any idea if they’d be excluded from an asset list in the child’s name when calculating fafsa?