OT: 529 change proposal

[an]

Like I said, we’ll just have to wait and see. I would never have thought SCA-5 would be proposed much less got extremely near passing by democrats, the party that’s supposed to be defending the minorities. But it did. So, I’m not ruling anything out.

[Coronita]

[quote=AN]Like I said, we’ll just have to wait and see. I would never have thought SCA-5 would be proposed much less got extremely near passing by democrats, the party that’s supposed to be defending the minorities. But it did. So, I’m not ruling anything out.[/quote]

I think the bloomberg editorial summed it up pretty well….

? Because it’s a question we may have to ask ourselves. As I observed when I first wrote about the plan, the very fact that we are discussing taxation of educational savings — redistributing educational subsidies downward — indicates that the administration has started scraping the bottom of the barrel when seeking out money to fund new programs. Why target a tax benefit that goes to a lot of your supporters (and donors), that tickles one of the sweetest spots in American politics (subsidizing higher education), and that will hit a lot of people who make less than the $250,000 a year that has become the administration’s de facto definition of “rich”?

Presumably, because you’re running out of other places to get the money.

And….

What it does argue for is diversifying where you put your money: some in traditional IRAs and 401(k)s, some in Roth, and hopefully, some in regular taxable accounts, because you’ve already maxed out your tax-advantaged contributions. That way a change in a single program doesn’t radically alter your retirement and college plans.

What it also argues for is saving even more than you are. The government is going to come for its money one way or another, and the best way to deal with that is to have more than you need.

[SK in CV]

[quote=flu]

I think the bloomberg editorial summed it up pretty well….

Why target a tax benefit that goes to a lot of your supporters (and donors), that tickles one of the sweetest spots in American politics (subsidizing higher education), and that will hit a lot of people who make less than the $250,000 a year that has become the administration’s de facto definition of “rich”?

Presumably, because you’re running out of other places to get the money.

[/quote]

Stupid, illogical conclusion. The benefit doesn’t go to a lot of supporters (or donors). It hardly goes to anyone. And those that the benefits do go to, are disproportionately not those that need it the most.

The reason to dump it obvious. It doesn’t reach a wide enough population. So the proposal is to scrap it for future benefits, (NOT for people who have already taken advantage of it.) and replace it with a program with a wider market.

[joec]

One thing people also hasn’t mentioned here is even if this ever got in and that’s an impossible “IF” (note all the “if this…it that happens in CA comments …it’s simply not going to happen), it can also get repealed and CHANGED AGAIN. You get all the money they taxed, etc…back after republicans take back both houses and the presidency and repeal this.

ObamaCare passed and is supported because the US is the only country in the developed world without some form of healthcare for everyone. Like I keep saying, unless we are ok and just start letting people just die in the streets to check their insurance first, healthcare is sorta a right in all the developed nations of the world. US pays near the most and has the worst healthcare and this issue hits me especially since even if you’re willing to pay, before Obamacare, insurers simply don’t want to sell to you so you had little to no options to buy. Praise the ACA for passing and curse Republicans that want to repeal it (I’m independent btw).

Tax laws change all the time yearly,,,you just play the “game” based on the rules and try to always win. As people notice, tax on earned income is very high. I suggest people who can afford to retire before 65 if they can afford to and pay for healthcare…then draw down or Roth convert all their retirement accounts for income without paying much or any tax. Make sure to refinance your mortgage to get a large tax deduction with super low rates while you’re working to offset the income withdrawn. After 5 or 10 years, you probably will have a lot of tax free money.

Also if tax rates become horrendous enough, people will simply also just leave the USA in droves (maybe this is just me).

Anyhow, I doubt this will even generate much money tax wise so it’s a stupid plan to begin with.

Like I would say, you tax or get money from the people who have it. Not the small amount in various small 529 plans.

[CA renter]

[quote=SK in CV][quote=flu]

I think the bloomberg editorial summed it up pretty well….

Why target a tax benefit that goes to a lot of your supporters (and donors), that tickles one of the sweetest spots in American politics (subsidizing higher education), and that will hit a lot of people who make less than the $250,000 a year that has become the administration’s de facto definition of “rich”?

Presumably, because you’re running out of other places to get the money.

[/quote]

Stupid, illogical conclusion. The benefit doesn’t go to a lot of supporters (or donors). It hardly goes to anyone. And those that the benefits do go to, are disproportionately not those that need it the most.

The reason to dump it obvious. It doesn’t reach a wide enough population. So the proposal is to scrap it for future benefits, (NOT for people who have already taken advantage of it.) and replace it with a program with a wider market.[/quote]

Exactly.

And it’s not because they are running out of other places to get the money…it’s because the places with the most money have the best lobbyists. That’s not a coincidence, either.

[brg654]

good article on why this actually makes sense.

http://www.vox.com/2015/1/20/7862889/college-savings-529-tax-credit

for the record, i’m 35, single with no kids, and an income over 200k. i use a 529 purely as a tax shelter right now (beneficiary as myself, if/when i have kids, i can transfer the beneficiary. if i never have kids, i can transfer it over to my cousin’s children). in other words, the proposed change is to stop people like me who will have the means to send my children to college without financial aid, and transfer it to those who might not attend college without assistance.

while this would hurt me personally, it’s probably better for society as a whole. isn’t that what our politicians should be doing instead of pandering to their campaign contributors?

[Anonymous]

There’s a lot of butthurt here over something that has not and will not happen.

[scaredyclassic]

But it’s not worth deferring taxes if taxes get much higher later right?

[joec]

[quote=scaredyclassic]But it’s not worth deferring taxes if taxes get much higher later right?[/quote]

Depending how much you have done prior to retiring, the actual tax rate may not matter if you derive the bulk of your income from other means. Also, if you have other funds to live off of.

That being the case, it’s probably always better to defer since when you are working, you are always at your marginal (highest) tax bracket so you defer as much as you can during the working years.

If you’re a young worker without a pension (most people now), then you will have a situation where if you do decide to retire early, you can start withdrawing retirement assets tax free or very low rates if you have enough tax deductions to balance your tax due on the withdrawal (deductions aren’t credits so you need to have some form of income to use them).

You may also have periods in your life where you take time off, are laid off, change careers and start a business where you aren’t making much at all.

I’ve been in nearly all those situations and I’ve mentioned before I pay very low taxes now since my income is sadly, very low. That being the case and also when I took time off, I did IRA conversions as well and know of a friend who is “retired” with no earned income so he can do withdrawals at low tax rates or even free…even though he’s a millionaire.

This is why I tend to not favor Roth 401(k)s since you can control your income in the future if you aren’t super wealthy or have a pension.

[scaredyclassic]

ok. true. i guess it depends on individual cics. and the steadiness of work.

it’s nice to be working a lot and having lots of money.

but i think i could eb happy not working with not so much money.

still it was nice to buy 2x 1.75l johnnie walker black at costco for 90.00 and not think about the money.

[an]

[quote=joec]One thing people also hasn’t mentioned here is even if this ever got in and that’s an impossible “IF” (note all the “if this…it that happens in CA comments …it’s simply not going to happen), it can also get repealed and CHANGED AGAIN. You get all the money they taxed, etc…back after republicans take back both houses and the presidency and repeal this.[/quote]That in itself is an if. Since I started this thread talking about the future. Of course it’s all about ifs. What do you expect it to be when we’re talking about the future? My crystal ball is broken, so I have to use if. Is your crystal ball working?

[quote=brg654]i use a 529 purely as a tax shelter right now[/quote]Agree, 529 is a tax shelter. Same as 401k, 403b, IRA, etc. That’s exactly what I’m saying.

[joec]

[quote=AN]That in itself is an if. Since I started this thread talking about the future. Of course it’s all about ifs. What do you expect it to be when we’re talking about the future? My crystal ball is broken, so I have to use if. Is your crystal ball working?
[/quote]

Yes, it’s all an unknown what will happen. I suppose I’ve noticed with what I do now, I tend to glaze over news articles that “propose” things rather than things that are already law. My point is it’s pointless to worry about things which will never pass or may/if/who knows (remember all the talk of canning mortgage tax deduction? what about deduction for MR fees?…)

if they will pass. I tend to just look at the tax landscape yearly and base my actions on that. If you’re like scaredy and work non-stop in 1 or a few professions and have millions saved and will get taxed a lot, I suppose just be glad that you will HAVE enough in retirement, even though you will tapped a lot when you withdraw. At that point, consult a tax pro and see what you can do at that point, but at the end of the day, you’re probably in the boat of people who will be ok regardless, no matter what the tax rates are. Just minimize at that point forward.

As mentioned, I’m sadly not in that boat with taking time off, career changes, being laid off, starting businesses, no pension, etc…

This is why my view is biased to this point. If you’re high tech and get laid off at 50+, maybe use that time to start a business, convert money, etc…I know when I was in tech, I certainly had hundreds of k in cash/stock so for most people here who saved diligently, you should have money to live off of if needed and maybe time your withdrawals based on how the tax landscape is that year.

tl;dr: be prepared for any situation. I don’t need a crystal ball if I’m diversified with all my accounts/cash/assets/real estate, etc…all this talk of 529s being taxed, raising capital gains, etc…is just a lot of hot air really and a waste of time/discussion currently.

[an]

Fyi, I’m not worried, since I’m diversified in all tax benefit accounts. I was just opening up a discussion about it. If talking about what if isn’t your cup of tea, feel free to ignore the thread.

[joec]

[quote=AN]Fyi, I’m not worried, since I’m diversified in all tax benefit accounts. I was just opening up a discussion about it. If talking about what if isn’t your cup of tea, feel free to ignore the thread.[/quote]

You just came off to me as all irate and freaked out about it…People kept posting this won’t past anyways with a republican congress so what’s the worry?

Discussion is fine, just the endless what IF, this That, ETC…on and on, etc…sounded like more freaked and worried to me.

Good you’re diversified, you don’t need to worry really…honestly…of any of this crap.

[an]

[quote=joec][quote=AN]Fyi, I’m not worried, since I’m diversified in all tax benefit accounts. I was just opening up a discussion about it. If talking about what if isn’t your cup of tea, feel free to ignore the thread.[/quote]

You just came off to me as all irate and freaked out about it…People kept posting this won’t past anyways with a republican congress so what’s the worry?

Discussion is fine, just the endless what IF, this That, ETC…on and on, etc…sounded like more freaked and worried to me.

Good you’re diversified, you don’t need to worry really…honestly…of any of this crap.[/quote]again, I’m not worried at all. Its actually fun for me to talk about what if. You might think I’m freaking out, but in reality, I’m not. I know it won’t pass now with the Republican congress. But its good to see where the president want to get more revenue for his spending.

[Author]

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