Clean Up

Posted on Sunday, January 14th, 2024

Life is quickly returning to normal around here, bringing a sense of calm. The kids have returned to their work and school routines, securely settled in their apartments and dormitories. The quiet evenings reading by the fire have been quite enjoyable, and I’ve even begun my early spring-cleaning efforts.  There is something so satisfying about cleaning out the basement and cluttered files. I am definitely going to need a dumpster. The thing I am most happy about is cleaning up is my diet. No more cookies and cake for me – for now.  

Spring cleaning and new tax rules – exciting stuff. There are actually two new tax rules that I am excited to talk to some of you about this year. The first and subject of our note today can help you prepare your kids for their future and clean up some accounts gathering dust. As of the beginning of 2024, you can turn a 529 Plan into a ROTH IRA. If you have a 529 Plan Education Account that isn’t being used, keep reading.  

In late 2022, Congress enacted the SECURE 2.0 Act, introducing significant alterations to U.S. tax legislation to enhance Americans’ capacity to increase their retirement savings. Among its provisions is the introduction of a novel option for transferring funds from a 529 account to a Roth IRA. This innovative feature enables families to transform any remaining 529 funds into retirement savings, all while bypassing penalties associated with non-educational withdrawals. 

It’s the IRS. Of course, there are rules. Here they are: 

  • The 529 plan must be open for a minimum of 15 years before you can do a 529-to-Roth IRA transfer. 
  • The beneficiary of the 529 plan must also be the owner of the Roth IRA. 
  • 529 plan contributions made within the last five years aren’t eligible for a tax-free transfer. 
  • There’s a lifetime maximum of $35,000 for 529-to-Roth IRA transfers. 
  • Normal Roth IRA annual contribution limits apply. 
  • There are income limits to the ROTH contribution, but it is over $125,000 (child’s income as a single individual) 
  • They have to have earned income and cannot contribute more than they made in income. 

If you have a 529 that has been sitting gathering dust, get in touch, and we can see if this option works for you. 

Stocks were overbought, but sentiment and position have backed off a bit, which is one for the bulls. The yield curve shows signs that it may dis-invert, which has our attention – in a negative way. Given the moves from the November low and hedge fund positioning, we would expect to see the market sell-off by at least 5%. It hasn’t, and that is another one for the bulls.  Our calendar’s next significant data point is the options expiration this Friday, January 19th. This is one of the top 5 options expirations of the year, and how the market performs in the following days will be very important. We will be watching the market intently on the trading days after the expiry. If stocks fail to sell off, then we could be off to the races. The month of March has significant issues, more of that in a future note.  

“Short-term volatility is greatest at turning points and diminishes as a trend becomes established.”– George Soros  

I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein  

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill  

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .  

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.