You can still contribute for 2022.
Source:
https://smartasset.com/retirement/ira-contribution-deadline#
Note that this isn’t a new contribution, but rather, a backdoor transfer from my SEP-IRA, which I’ve been making the past few years, but always within the tax year’s calendar year.
That sounds like a conversion to me. If that’s the case, then I do think you missed the boat.
Right, “conversion” is the word I should have been using. So I am indeed screwed. Crap…
When you said “backdoor Roth” I assumed you meant something else. Often people use that term to refer to a specific process that involves both a contribution and a conversion. And when one is doing that specific thing I was thinking of, then the year of conversion doesn’t matter much.
But clearly you’re doing something different from what I was thinking of. Hope your tax guy can figure something out.
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I don’t think you’re screwed. You can convert traditional to Roth at anytime. The conversion just won’t show up on your 2022 tax forms.
This is kind of true, but there are often reasons why you want to structure the conversions so that you do $X/yr in order to minimize tax burden. If that’s the case, then I think he may have lost the ability to do whatever amount was most beneficial in 2022.
Apparently you can now roll a 529 into a Roth under the Secure Act. This seems like a MASSIVE loophole.
There’s some pretty decent restrictions IMO.
Taking the description of the change from thestreet.com article it seems like not as massive for a $35k lifetime limit with the yearly limits, only after you hold it already for 15 years. What angles are you seeing? 529s are transferrable so I think it would be easy to share this among family members I suppose, but it would take a few years to ensure you hit the limit for each person. Of course it is nice to basically prepay someone’s yearly Roth contributions for the first 4-5 years of their working career since that is typically when people have the least extra money to contribute and Roth contributions early in a career compounding for 40 years are gonna be huge.
The legislation allows for transfers from 529 plans to Roth IRAs. After 15 years, the assets in a 529 plan can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. Rollovers cannot exceed the aggregate amount before the 5 years ending on the date of the distribution. The rollover is treated as a contribution towards the annual Roth IRA contribution limit.
The Roth IRA contribution income limits are waived for transfers from 529 plans, making them accessible to high-income 529 account owners and beneficiaries. This change provides a solution for individuals who may have concerns about having too much money in a 529 plan if their child receives a scholarship. It allows them to help their child fund a Roth IRA without paying income taxes and 10% penalties.
Yeah, my initial reaction was this. Then it morphed into what Freddbird said.
The one thing I’m not clear on is if the kid will need earned income or not to go from 529 to Roth. I’ve heard differing opinions on that. It doesn’t make sense that they would need any, but I have seen a bogleheads thread where earned income would be required.
Using the same article from the previous post, these two seem big: automatic enrollment and 401k match on student loans paid (is how I’m reading)
Beginning in 2025, the SECURE 2.0 Act of 2022 will expand automatic enrollment in retirement plans, starting at a contribution rate of at least 3%. Automatic enrollment in 401(k) plans has been shown to increase participation. With some exceptions for small businesses, the bill requires 401(k) and 403(b) plans to automatically enroll eligible participants, who can choose to opt out of participation if they wish.
The legislation allows employers to treat student loan payments as “elective deferrals” for matching purposes in workplace retirement accounts. This will allow student loan borrowers to benefit from an employer match even if they are unable to contribute to their own retirement plan.
The RMD changes also seem great for the people that actually have money saved at those ages. At that point in life for those privileged people the nest egg is so big that a few years of compounding is a lot of money.
If you’re funding them at birth for G3, $35k per person is pretty meaningful. It escapes estate and capital gains taxes for the donor and is immensely beneficial to the beneficiaries as it normally takes 6 years to get that much into a Roth (and it’s hard to do early in a career). Massive may be over stating it but this is a real opportunity for a lot of people.
You can’t start from birth, since the account has to be open for 15 years. So the earliest you could start is at age 15. And you are still subject to annual limits so you can’t roll over the 35K in one shot. You have to do it over 3-5 years (depending on what annual limits happen to be at the time).
Still good. But not as good as the headlines make it sound.
I’m confused. If you fund at birth you can convert at age 16, no?
At age ~16 you can start conversions but only up to the annual limit. So let’s say that the annual IRA contribution limit then is $7K/year. You can put in 7K at age 16, then again at age 17, and so on, until you reach a total of 35K. Then you’re done with your 529 → roth rollovers.
An interesting question is whether a middle aged bro like myself should just open a 529 and pop approx 15K in there. Let it grow for 15 years and then start converting it over to Roth.
It’s a small edge, but I’m sure I’ve spent significant time pushing smaller edges than that.
Has to convert to a beneficiary. Not you.
I like it tbh.
I can open a 529 with myself as the beneficiary, right?
You can already contribute to a Roth every year so i don’t see the upside