Get a break on saving for life’s big milestones, from college to retirement.
, when beneficiaries of 529 plans will be allowed to roll over up to $35,000 during their lifetime from a 529 to a Roth IRA. There are some restrictions, such as that the 529 account has to be set up at least 15 years previously and the money has to stay in the account for at least five years first. But with this new option, “there’s more flexibility than there ever has been around mitigating the impact of overfunding a 529 plan,” Lucina says.
Interest that you earn on investments like money-market accounts, CDs and corporate bonds is typically taxed at your usual income-tax rate, which could be as high as 37% if you’re in. It makes no difference if you earn that interest directly or if it gets paid out through a dividend—such as when a mutual fund or ETF passes along interest from bonds. Either way, you’re on the hook to pay that income-tax rate.
below income-tax rates. If you hold on to an investment for longer than a year before selling it, you’re usually taxed at either 0%, 15% or 20%. How dividends are taxed depends on their status. If you own blue-chip stocks you will mostly receive qualified dividends. The good news: these are taxed at the generally lower capital-gains rates.
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