Levi Sanchez worked in the Wealth Management industry for 3 years at Merrill Lynch as a junior adviser for a team managing nearly half a billion in personal assets. In May of 2017, he decided to depart the wirehouse world and begin his journey to launching an RIA focused on young professionals, whose financial futures can be shaped now. Having control over his own fee structure and marketing techniques would allow Levi to pursue his goal of helping his generation solve their financial problems and build a better future.
The lack of financial education throughout all generations has always been a weakness in our educational system. Making matters worse, the industry caters to individuals with significant wealth over people with little assets in comparison. The end result, on average, young adults don’t establish healthy saving, investing, and debt management habits. Even though that’s the best possible time for these habits to be learned. Therefore, Levi decided to leave the business and start the journey towards launching Millennial Wealth and tackling his goal of educating, investing, and planning for his peer’s futures.
Levi grew up in Eastern Washington and attended Washington State University. He's always had a passion for investing and learning about money. In his free time, he enjoys playing golf, basketball and watching the latest shows on Netflix.
Millennial Wealth is an Investment Adviser registered with the State of Washington. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. We do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. The information provided is subject to change without notice.
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You are correct, a 529 plan would only allow for money to be used for qualified education expenses, otherwise, a 10% penalty is assessed on the withdrawal amount. One interesting note, however, is 529 withdrawals aren't assessed the penalty if the beneficiary receives a scholarship.
If you'd like your daughter to have the flexibility to spend the money on other things, not just for her education, you should consider a custodial account such as an UTMA/UGMA. A custodial account would allow you to retain control until the age of majority (depending on state 18 or 21 typically), at which time she will receive full control. This type of account would allow you to select investments such as a low-cost index fund. I would suggest looking at Vanguard, you can also open a custodial account directly through them.
I do advise you to understand that this account gives your daughter FULL control at the age of majority. Unfortunately, most individuals aren't financially savvy at that age since financial literacy isn't taught in school. Open communication regarding the intention of the account and responsibility is key.
Hi there! Great question. This is often overlooked by people, but there is a five-year rule associated with Roth IRA's regardless of whether you're transferring from a Roth 401(k) or doing a conversion from a traditional 401(k) or IRA. The five year rule states that earnings and interest from a Roth IRA will be taxed unless you've owned the Roth IRA for at least five years. While it does not sound like you want to take withdrawals from the Roth, it is something to be aware of.
To answer your original question, by transferring the Roth 401(k) to a Roth IRA, you forego having to make required minimum distributions at 701/2. In fact, you never have to take a distribution from a Roth if you don't want to! It makes Roth's a great way to leave a legacy tool if you'd like to leave assets to children or grandchildren as well. All the extra years of tax-free compounding can really add up!
Hope that's helpful.
Great question. There a few considerations to take into account before making the decision to rollover your 403(b) to an IRA.
1. Review your investment options in the 403(b). Given your recent retiree status, do the options in the plan still support your needs? The investment options in a 403(b) are limited. An IRA has the entire universe of potential investment options available. Depending on your goals, an IRA's investment options may make more sense.
2. Review Fees. As a participant in a 403(b) you pay for your investment expenses, but in most cases, also the cost to administer the plan. Typically, the administrative and recordkeeping costs are spread out across all plan participants as a percentage of assets. This information can usually be found in the summary plan description document, or by calling your administrator. Depending on where you open an IRA these costs could be more than the costs associated with the IRA. If you plan to do-it-yourself, you'll pay only trading costs for the investments and there expenses. If you have a financial advisor, they'll likely charge a percentage of assets to manage it. Ranging from 1-1.5%.
3. Creditor Protection. Your 403(b) may or may not be covered by ERISA, meaning that if you rolled your funds into an IRA your would forego the creditor protection ERISA provides.
Congratulations on your retirement and I hope these considerations provide food for thought in deciding whether to roll over your 403(b).
Hi there, unfortunately, due to the amount of time until your daughter is slated to start college, contributing to a 529 loses most of its appeal. Because the funds are needed in less than a year's time, it could be rather risky to invest the money. In the event of a market pullback, you could end up with less money than you started with in that time frame. However, depending on the state you live in, the 529 may offer state tax benefits. If you claimed tax benefits and invested in a very conservative fund it may make sense. Although, if your daughter plans to attend medical school, you could capture 4 years (during her undergrad) of tax-free growth and attempt to pay undergrad out of pocket. This may come down to having a conversation with her around your budget if the goal is to remain student loan free.
Other items to be aware of as it relates to 529's and your situation -- if you have other children that are younger, any unused funds can be used for their education. In this case, it may make more sense to pay out of pocket for college expenses and invest other funds for a younger child's education in a 529. In any case, the beneficiary of the 529 can very easily be changed amongst siblings.
Lastly, the maximum contribution without paying gift taxes for 2018 is 15k per parent. Therefore a max of 30k could be contributed to the 529. There is another stipulation that allows you to front-load the 529 as well, up to 5 years worth of contributions. Amounting to a total of 150k! Of course, the benefit of frontloading is to benefit from tax-free growth sooner. This may not pertain to your situation, but always good to know the rules inside and out! Hope that was helpful.
At 2.74% you're getting a really good rate for a car loan, however, the principle is fairly large. I wouldn't compare your bank account interest rate to the car loan, rather the car loan to what you're earning with your investments. The savings account should be viewed as your emergency fund and/or any other near-term financial obligations. If you have roughly 3-6 months of living expenses saved in the savings account for unexpected expenses, you could consider using a partial amount of the $1100 towards long-term investments. Your investments over the long-term will likely grow more than 2.74% on average each year given you've invested as a 24-year-old should, rather aggressively. However, you can't really go wrong with paying down your car loan either and using the $1100 towards paying it off quicker isn't a bad idea. This is a classic case of opportunity cost. What could you money be doing instead of paying off that loan? It'd be a no-brainer if the interest rate was much higher, but because it's so low you should at least consider using part of the excess after your emergency fund is established towards long-term investments in either retirement accounts, or a taxable brokerage account.