Picking up Nickels

Thursday, September 26, 2024

How to Make a Fidelity 529 to Vanguard Roth IRA Rollover

Ever since the SECURE 2.0 Act was signed into law in December 2022, I have been keeping an eye on the provision allowing a tax-free rollover of unused 529 plan funds into a Roth IRA for the 529 plan beneficiary. We're done paying for the education of our children at this point, but ended up over-saving because of their decision to attend public universities that offered generous merit-based scholarships.

Ben Henry-Moreland of Kitces.com has a nice overview of the 529-to-Roth provision here, with these highlights:

  • The 529 plan must have been maintained for a period of at least 15 years before the date of the rollover
  • The amount of each rollover cannot exceed the aggregate amount of contributions (and earnings attributable thereto) made earlier than the 5-year period before the date of the rollover
  • The amount of each rollover also cannot exceed the IRA contribution limit for that year, minus any amounts that the taxpayer contributed directly to the IRA that year
  • The amount of each rollover cannot exceed the aggregate amount of contributions (and earnings attributable thereto) made earlier than the 5-year period before the date of the rollover
  • The maximum amount of funds that a 529 plan beneficiary can roll into a Roth IRA over their lifetime is $35,000
  • Unlike making a normal Roth IRA contribution, where the ability to contribute to a Roth phases out for individuals with higher incomes, there are no income-based phaseouts for a 529-to-Roth rollover

We met all of the above criteria and I checked in with my accountant about potential state tax implications, so I was ready to proceed with the rollover of funds from our Fidelity 529 plans to existing Vanguard Roth IRAs for my children.

This process is initiated with the institution where the 529 plan is held, so I scrolled down to the "To transfer from a Fidelity-managed 529 to an external Roth IRA" section on Fidelity's Making 529 withdrawals and contributions landing page. This states that the procedure to transfer a Fidelity 529 plan to an external Roth IRA is initiated by using this withdrawal form pdf and having a physical check mailed directly to Vanguard.

For the first page of the form, I entered my name, SSN, and phone number for line 1 and the child's name and SSN for line 2. For line 3, I entered the Fidelity 529 plan account number and checked the boxes including "529-to-Roth IRA transfer" and "Leave account open for future possible contributions":

For the second page of the form, I checked the "ONLY the following amount(s) from the following portfolio(s)" box and entered the 529 plan portfolio name and the contribution amount ($7,000 max for 2024) for line 4:

For the third page of the form, I checked the "Current Year Contribution" and "External Roth IRA" boxes. I had already contacted Vanguard support for the proper mailing address to have the check sent to, so I used that address and the Vanguard Roth IRA account number to complete line 5 on this page:

Finally, to complete the form, on the fifth page I entered my name and signed the form for line 6:

At this point it was time for my completed form to be sent to Fidelity. The form gives you a P.O. Box in Cincinnati, OH for mailing via USPS, but instead I uploaded my completed pdf to fidelity.com to the attention of "Account services" via their Secure Message Center (login required) to expedite the process.

Once the Fidelity document upload was complete, it took 9 days for the money to appear in the Vanguard Roth IRAs:

  • Day 1: File upload to fidelity.com
  • Day 2: Received confirmation message of receipt of documents from Fidelity
  • Day 3: Received confirmation message from Fidelity that the check has been printed and will be mailed shortly
  • Day 9: Funds appeared in Vanguard Roth IRA

Wednesday, September 11, 2024

September 2024 Financial Asset Roundup

Here are my current financial assets as of the market close on September 12th, 2024:

Asset Aug 2024 Sep 2024 Change




Checking 1,399 1,848 449
Money Market 74,346 78,084 3,738
Savings Bonds 242,768 243,533 765
Treasurys 100,000 100,000 0
CDs 51,495 51,828 333
Brokerage 441,526 492,227 50,701
401k 400,822 416,376 15,554
Roth IRA 300,729 308,792 8,063
IRA 1,466,791 1,500,048 33,257
529 Savings 180,297 183,165 2,868
Total Assets $3,260,173 $3,375,901 $115,728
      3.55 %

The S&P 500 had a strong month, rising 2.83% (+15.21% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for August fell to 4.2%. A solid 142,000 new jobs were added, showing a stronger number after July's numbers were revised downward. Oil prices fell to the $67 level (from $79) from a weakening demand outlook, with that $67 price reflected in a local unleaded regular gasoline price of $2.99 at my last fill-up.

On the financial front, my assets have again hit an all-time high, surpassing the previous high from July 2024! I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. I also took an S Corp distribution and my 13 week T-Bills (5.395%) matured and were rolled into new ones at 5.103%. I also opened some Navy Federal add-on CDs as an interest rate hedge and started the process to rollover excess Fidelity 529 plan money to existing Vanguard Roth IRAs for my children. Once that is completed I should probably dedicate a post to documenting the process since I had to reach out to Fidelity and Vanguard to get the details correct.

Another thing I recently learned was that as of January 2025, you will no longer be able to buy paper Series I savings bonds with your tax refund (hat tip to David Enna of tipswatch.com). After conversations with my CPA over the years I'm sure this wasn't a terribly popular program with most taxpayers, but it looks like I won't be making any more supersized January estimated tax payments to help bulk up my paper I Bond holdings. I should probably consider converting everything to electronic format at treasurydirect.gov to make future redemptions easier, but that might be a project for next year.

As for the non-financial, everyone is back to school and the bills are finally coming due for our family vacation last month. I'm also working to update the old water conditioning equipment we have for our home's well water, which testing has confirmed to contain PFAS "forever chemicals". It's kind of scary that everyone has probably been ingesting this stuff for years without knowing it.

Wednesday, August 28, 2024

Hedge Against Future Rate Cuts with Add-On CDs

I've been watching the rates on Fidelity brokered CDs drop as signs point to a September rate cut, so I decided it was time to use some add-on CDs as a hedging strategy against future rate cuts:

My thought is to lock in current rates with Navy Federal EasyStart Cds that can be opened with a low minimum purchase ($50) while allowing you to add additional money at any time. Current offerings are 4.75% APY for 12 months, 4.45% APY for 18 months, and 4.15% APY for 24 months, which are pretty competitive with the current Fidelity brokered CDs shown above:

My plan is to have these in my back pocket as a potential destination for future cash in the event CD rates fall back below 4% over the next couple of years. I certainly remember how attractive it was when Penfed offered 3.5% APY CDs in 2018 (Ha!), so it never fails to be prepared. With any luck I won't need them, but it's unclear how low rates could potentially get over the next year or two.

Tuesday, August 13, 2024

August 2024 Financial Asset Roundup

Here are my current financial assets as of the market close on August 12th, 2024:

Asset Jul 2024 Aug 2024 Change




Checking 2,491 1,399 -1,092
Money Market 83,661 74,346 -9,315
Savings Bonds 241,966 242,768 802
Treasurys 90,000 100,000 10,000
CDs 51,313 51,495 182
Brokerage 469,988 441,526 -28,462
401k 415,863 400,822 -15,041
Roth IRA 311,207 300,729 -10,478
IRA 1,499,923 1,466,791 -33,132
529 Savings 179,011 180,297 1,286
Total Assets $3,345,423 $3,260,173 -$85,250
      -2.55 %

The S&P 500 has been volatile of late, falling 5.14% (+12.05% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for July rose to 4.3%. A less-than-expected 114,000 new jobs were added, which (along with a Bank of Japan rate hike) helped fuel a stock market decline over fears of an economic slowdown. Similarly, Home Depot reported that people were spending less on home improvement projects, a potential sign of a slowing housing market. Oil prices fell to the $79 level (from $82), with that $79 price reflected in a local unleaded regular gasoline price of $3.19 at my last fill-up.

On the financial front, I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. I also took an S Corp distribution and my 13 week T-Bills (5.395%) matured and were rolled into new ones at 5.212%. That lower T-Bill yield seems to be consistent across maturities, with even the yield on a 3 year T-Note dropping from the 4.399% I received at the auction last month to 3.810% a week ago.

As for the non-financial, we recently returned from a really enjoyable family vacation in Canada. The weather, scenery, culture, and food were amazing and there were so many other tourists enjoying themselves that it's hard to imagine the economy is slowing down. It was wonderful that our children were able to join us on our trip, they're adults now and I'm not sure how often they'll be able to do so in the years to come.

Thursday, July 11, 2024

July 2024 Financial Asset Roundup

Here are my current financial assets as of the market close on July 10th, 2024:

Asset Jun 2024 Jul 2024 Change




Checking 1,299 2,491 1,192
Money Market 75,979 83,661 7,682
Savings Bonds 241,199 241,966 767
Treasurys 90,000 90,000 0
CDs 51,138 51,313 175
Brokerage 426,353 469,988 43,635
401k 393,495 415,863 22,368
Roth IRA 301,344 311,207 9,863
IRA 1,458,881 1,499,923 41,042
529 Savings 176,539 179,011 2,472
Total Assets $3,216,227 $3,345,423 $129,196
      4.02 %

The S&P 500 has reached the 5,600 level for the first time, rising 5.09% (+18.12% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for June rose to 4.1%. A steady 206,000 new jobs were added, showing a solid, but cooling labor market. Oil prices rose to the $82 level (from $77). The $82 price translates to a local unleaded regular gasoline price of $3.37 at my last fill-up.

On the financial front, my assets have again hit an all-time high, surpassing the previous high from June 2024! I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. My 13 week T-Bills (5.404%) matured and were rolled into new ones at 5.383%. I also took a distribution from my S Corp and added a 2027 rung to my Treasury/CD ladder with 3 year T-Notes at 4.399% since rate cuts could be coming before the end of the year.

As for the non-financial, we enjoyed a nice 4th of July holiday and are currently dealing with the dog days of summer. The hot & humid weather has made keeping on top of lawn & garden work a bit challenging, but Mrs. Frugalson and I are looking forward to a short getaway in July before we wrangle the entire family for a longer vacation in August.

Tuesday, June 11, 2024

June 2024 Financial Asset Roundup

Here are my current financial assets as of the market close on June 10th, 2024:

Asset May 2024 Jun 2024 Change




Checking 2,984 1,299 -1,685
Money Market 66,878 75,979 9,101
Savings Bonds 240,434 241,199 765
Treasurys 90,000 90,000 0
CDs 50,957 51,138 181
Brokerage 406,390 426,353 19,963
401k 381,078 393,495 12,417
Roth IRA 297,224 301,344 4,120
IRA 1,442,706 1,458,881 16,175
529 Savings 175,352 176,539 1,187
Total Assets $3,154,003 $3,216,227 $62,224
      1.97 %

The S&P 500 has hit another all-time high, rising 2.64% (+12.39% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for May rose to 4.0%, the first time it's hit 4% since January 2022. A hotter than expected 272,000 new jobs were added, which may not be great news for interest rate cuts and cooling inflation data. Oil prices fell to the $77 level (from $79) despite OPEC+ extending production cuts. The $77 price translates to a local unleaded regular gasoline price of $3.29 at my last fill-up.

On the financial front, my assets have again hit an all-time high, surpassing the previous high from May 2024! I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. My 13 week T-Bills (5.384%) matured and were rolled into new ones at 5.395%. I also took a distribution from my S Corp and made my initial Form 5500-EZ filing for my Solo 401k since my asset level at the end of 2023 hit $250k for the first time.

As for the non-financial, the school year is almost over and we're ready to enjoy the nice weather and a summer family vacation. It's interesting that our adult children still want to go on vacation with us, considering how lame I thought my parents were when I was their age. I guess paying for a nice hotel and good restaurants make enough of a difference these days. :)

Monday, May 13, 2024

May 2024 Financial Asset Roundup

Here are my current financial assets as of the market close on May 10th, 2024:

Asset Apr 2024 May 2024 Change




Checking 1,960 2,984 1,024
Money Market 73,698 66,878 -6,820
Savings Bonds 224,657 240,434 15,777
Treasurys 90,000 90,000 0
CDs 50,890 50,957 67
Brokerage 414,339 406,390 -7,949
401k 372,492 381,078 8,586
Roth IRA 292,917 297,224 4,307
IRA 1,426,592 1,442,706 16,114
529 Savings 174,066 175,352 1,286
Total Assets $3,121,611 $3,154,003 $32,392
      1.04 %

The S&P 500 has stayed near all-time highs, rising 1.20% (+9.49% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for April rose to 3.9%, with a "cooling" 175,000 new jobs added. Oil prices fell to the $79 level (from $85) in spite of Middle East tensions. The $79 price translates to a local unleaded regular gasoline price of $3.45 at my last fill-up.

On the financial front, my assets have again hit an all-time high, surpassing the previous high from April 2024! I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. My 13 week T-Bills (5.394%) matured and were rolled into new ones at 5.395%. I also took a distribution from my S Corp and finished my 0% fixed rate November 2016 I Bonds flip to 1.3% fixed rate April 2024 I Bonds while adding another $5k in paper April 2024 I Bonds as a 2023 Federal tax refund.

As for the non-financial, we're heading toward the end of the school year where the youngest Frugalson is about to graduate from college with a plan to start grad school in the fall. Sometimes it's hard to believe how grown up our children are and how close we are to actually retiring from our careers and moving on to the next phase of our lives. We've come a long way, baby!