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Yahoo
23-05-2025
- Business
- Yahoo
GOP Tax Bill Touts 'Trump Accounts' Giving $1,000 To Newborns — But Experts Say It Wouldn't Do Much For Parents
As the One Big Beautiful Bill Act makes its way to the Senate, one piece of the proposed bill is still stirring heated debate among parents and caregivers. This part of the proposal aims to grant every newborn in the United States a $1,000 government-funded savings account — framed as an investment in the future of America's children. Supporters claim the initiative, backed by prominent conservative lawmakers, would promote financial independence and reduce long-term reliance on government aid. But economic experts and policy analysts are sounding the alarm, warning that the bill could deepen inequality, strain federal resources and divert attention from more effective ways to help lower-income children. 'As a parent I just have to laugh,' said Rebecca Schroeder from Florida. 'This is not what we want or need, nor what we asked for. We need real policy that makes having children affordable and equitable, not this overly patriotic political move. It feels icky to me.' Under the new bill, children born between Jan. 1, 2025, and Jan. 1, 2029, would receive the $1,000 deposit in an account, which would be invested in financial markets. Parents and loved ones can contribute to these accounts as well. Once the children are grown, they could withdraw the money to use for education, the down payment on a home, or capital to start a business. Previously known as 'Money Accounts for Growth and Advancement' or 'MAGA Accounts' — the Trump Accounts are not unlike a 529 college savings plan, explains Ted Callahan, a financial tax analyst with Intuit. 'The earnings on these accounts grow tax-deferred, which isn't all that different from a typical brokerage account,' he said. 'But other similar options to these accounts already exist.' Some of these already existing accounts include Coverdell Education Savings Account (ESA). Like a 529, it offers tax-free growth and tax-free withdrawals for qualified education expenses, including both K-12 and higher education. Another alternative is a custodial account, such as a UGMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act) account. These accounts don't have contribution limits, though large contributions may be subject to gift taxes. Unlike 529s and ESAs, custodial accounts can be used for any purpose that benefits the child, not just education. 'Each account type has its own pros and cons, so the right choice depends on your savings goals, how much control you want over the funds, and your tax situation,' said Callahan. If the bill passes as drafted, parents would be able to contribute up to $5,000 a year to the Trump Account and the balance would be invested in a diversified fund that tracks the U.S. stock index. Sen. Ted Cruz (R-Texas) who spearheaded the effort, said the accounts give children 'the miracle of the compound growth, the ability to accumulate wealth, which is transformational.' This comes on the heels of the Trump administration considering a $5,000 'baby bonus' gift to any woman who gives birth, which was lambasted by parents, commentators and policymakers alike for being a shortsighted bandaid for the true mental and financial stress parents are under. Though 'baby bond'-style legislation exists in numerous states already, tax experts are wary of this federal iteration. Callahan says he understands the goal behind the accounts, but doesn't necessarily see them as more or less beneficial than what already exists. This is because people can only contribute post-tax income to the accounts, and gains in the accounts would also be taxed when money was withdrawn. 'This makes this just a regular investment account with no real tax advantage,' said Callahan. 'If you want to really help parents, you would almost need to have an annual amount deposited in the accounts that were tax exempt, and that amount would need to be very significant given the increase in the cost of living, and then educate children in schools about these accounts once they are old enough so they can understand how investing works.' In the end, while the Trump Accounts were introduced with the promise of supporting American families, both tax experts and many parents remain unconvinced of their true value. Critics point out that the one-time payment structure falls short of addressing long-term financial needs like child care, health care, or education. At the same time, analysts argue that the broader tax plan surrounding the accounts primarily benefits high-income earners, with limited and temporary relief for middle- and lower-income households. As the policy takes effect, its real-world impact will ultimately determine whether it meets its stated goals — or adds to a growing divide in how tax benefits are distributed. 'We just want quality healthcare and to know that when we send our son to school he's safe,' said Schroeder. 'These accounts are not the answer, and I really wish they'd spend more time focusing on what matters to parents.' Donald Trump Openly Selling Access To Those Who Put The Most Cash In His Pocket Trump's Post About Taylor Swift Is So Immature, We Needed Child Psychologists To Explain What If We Just Gave People Enough Money To Live On?
USA Today
09-04-2025
- Business
- USA Today
Afraid to look at your 529 account? How to manage education savings in a down market.
Afraid to look at your 529 account? How to manage education savings in a down market. Show Caption Hide Caption The trade war hits stock markets — how can you protect your finances? The global trade war has hit the stock markets — this is how you can protect your finances. If you have an education savings account to manage while the stock market is flailing, and your kids are heading to college, you may be afraid to log in and survey the damage. Many consumers aren't all that familiar with how education savings accounts work, especially by comparison with more ubiquitous tax-favored retirement accounts. A 529 plan is a tax-advantaged account you can use to pay a wide range of education expenses, with plans sponsored by every state and the District of Columbia. They allow tax-free withdrawals for qualified expenses. They boast high contribution limits and are quite flexible in investment choices, according to a Motley Fool explainer. A Coverdell Education Savings Account, or ESA, also allows tax-free withdrawals on qualified expenses, and investment options are generally broader than for 529s, Motley Fool reports. The drawback is lower contribution limits: $2,000 per year per beneficiary. How soon do you need to spend your 529 account dollars? What to do with those accounts in a down market depends on several variables, starting with how soon you'll need the money. Many 529s and Coverdells function as college funds for children or grandchildren. If the beneficiaries are a decade or more away from college, then it might not matter so much how the stock market is doing now. If a beneficiary is in college now, you may face more urgent choices. To make investment decisions simpler, many education savings plans offer age-based options. You can pick an aggressive, moderate or conservative strategy keyed to the enrollment date of a child. You can also choose to manage investment decisions yourself. In that case, you may face some pressing choices about how your money is invested. Here are some tips from the experts, organized according to how soon the money will be spent. We'll assume the fund is for children or grandchildren to go to college, while recognizing that anyone can open a 529 or Coverdell account for a wide range of educational purposes. Scenario 1: The kids are 10 or more years away from college If you have an education savings account for kids who are 10 or 15 years away from needing the money, 'there's nothing that you need to change,' said Peter Lazaroff, a certified financial planner in St. Louis. The reason: Bear markets seldom last longer than a few years. Your education savings will have plenty of time to recover. You can ignore them for now. Or, you can take advantage of the down market and accelerate your contributions. An individual may gift up to $19,000 a year to a 529 account in 2025 without triggering federal gift taxes, and you're allowed to fund up to five years of contributions in a single year. 'If you really have a lot of extra money, you may want to think about super-funding a 529 plan in a bear market,' Lazaroff said. Scenario 2: The kids are in high school If the kids will need your education savings dollars in a few years, then you may be more worried about the current market downturn. Here's where those age-based investments work to your advantage. If you have a 529 with a target enrollment date of 2027, and the money is allocated accordingly, then you may have only a small percentage of the funds invested in stocks. 'If you have a child in high school, and you're in an age-based option, your account might be down a little, but you haven't thrown off your entire plan,' Lazaroff said. When it comes to target dates, most 529 plans are more conservative than retirement plans. A target-date 529 plan typically assumes the money will be spent in a narrow range of years, whereas a target-date retirement account assumes the funds will be spent across a much longer span. Target-date 529 plans "do get very conservative close to school age, and they descend rapidly in terms of risk," said Monica Dwyer, a certified financial planner in West Chester, Ohio. 'If you are in a 2025 target-date retirement fund, you may still be 60% stocks,' said Jonathan Swanburg, a certified financial planner in Houston. If you have a 529 plan with the same target date, by contrast, 'you are likely 10% stocks and 50-60% cash equivalents,' a much more conservative mix. Scenario 3: The kids are already in college If you are already spending down your education savings, and you opted for age-based allocations, then your funds are probably invested conservatively. The stock-market downturn may have little effect. Even if the account has lost some value, remember that 'you won't need all of the money on day one of college,' Lazaroff said. Pace your spending, and give the market time to rebound. If your education savings have lost significant value, and you're spending the money now, consider alternatives to withdrawing the money. 'Can you pay your tuition out of pocket while your account recovers?' Lazaroff said. Perhaps you can pay for the current semester in installments, drawn from your checking and savings accounts. 'The most important thing is not to panic and go to all cash,' Lazaroff said, liquidating a 529 or Coverdell while its value is down. If you are able to leave some or all of your 529 funds untouched, Swanburg said, then think about keeping the money invested, ride out the down market, and 'use it for your child's future Roth contribution, rather than tuition,' taking advantage of a recent change in investment laws. You can also move the money "from one sibling to another," Dwyer said. If you can keep education funds invested during a down market, you can spend them on a younger child when their value recovers. In any scenario: Take a look at your investments Many investors choose to ignore target dates in 529 plans and allocate the money themselves. If that's your situation, you may want to take a hard look at your investments right now. If your 529 plan is invested entirely in cash or cash equivalents, then the current market could present an opportunity to invest some of the funds in stocks. 'Things are on sale,' Lazaroff said. 'You can buy the same shares for less dollars.' Remember, however, that you are generally allowed to change investments within a 529 plan only twice per calendar year, or when you change beneficiaries. When the market is volatile, that constraint could be a good thing, because it hinders investors from making impulsive changes, said Greg McBride, chief financial analyst, personal finance, at Bankrate. 'I think, by nature, that sort of helps enforce the hands-off, ride-out-the-volatility advice,' he said.
Yahoo
09-04-2025
- Business
- Yahoo
Afraid to look at your 529 account? How to manage education savings in a down market.
If you have an education savings account to manage while the stock market is flailing, and your kids are heading to college, you may be afraid to log in and survey the damage. Many consumers aren't all that familiar with how education savings accounts work, especially by comparison with more ubiquitous tax-favored retirement accounts. A 529 plan is a tax-advantaged account you can use to pay a wide range of education expenses, with plans sponsored by every state and the District of Columbia. They allow tax-free withdrawals for qualified expenses. They boast high contribution limits and are quite flexible in investment choices, according to a Motley Fool explainer. A Coverdell Education Savings Account, or ESA, also allows tax-free withdrawals on qualified expenses, and investment options are generally broader than for 529s, Motley Fool reports. The drawback is lower contribution limits: $2,000 per year per beneficiary. What to do with those accounts in a down market depends on several variables, starting with how soon you'll need the money. Many 529s and Coverdells function as college funds for children or grandchildren. If the beneficiaries are a decade or more away from college, then it might not matter so much how the stock market is doing now. If a beneficiary is in college now, you may face more urgent choices. To make investment decisions simpler, many education savings plans offer age-based options. You can pick an aggressive, moderate or conservative strategy keyed to the enrollment date of a child. You can also choose to manage investment decisions yourself. In that case, you may face some pressing choices about how your money is invested. Here are some tips from the experts, organized according to how soon the money will be spent. We'll assume the fund is for children or grandchildren to go to college, while recognizing that anyone can open a 529 or Coverdell account for a wide range of educational purposes. If you have an education savings account for kids who are 10 or 15 years away from needing the money, 'there's nothing that you need to change,' said Peter Lazaroff, a certified financial planner in St. Louis. The reason: Bear markets seldom last longer than a few years. Your education savings will have plenty of time to recover. You can ignore them for now. Or, you can take advantage of the down market and accelerate your contributions. An individual may gift up to $19,000 a year to a 529 account in 2025 without triggering federal gift taxes, and you're allowed to fund up to five years of contributions in a single year. 'If you really have a lot of extra money, you may want to think about super-funding a 529 plan in a bear market,' Lazaroff said. If the kids will need your education savings dollars in a few years, then you may be more worried about the current market downturn. Here's where those age-based investments work to your advantage. If you have a 529 with a target enrollment date of 2027, and the money is allocated accordingly, then you may have only a small percentage of the funds invested in stocks. 'If you have a child in high school, and you're in an age-based option, your account might be down a little, but you haven't thrown off your entire plan,' Lazaroff said. When it comes to target dates, most 529 plans are more conservative than retirement plans. A target-date 529 plan typically assumes the money will be spent in a narrow range of years, whereas a target-date retirement account assumes the funds will be spent across a much longer span. Target-date 529 plans "do get very conservative close to school age, and they descend rapidly in terms of risk," said Monica Dwyer, a certified financial planner in West Chester, Ohio. 'If you are in a 2025 target-date retirement fund, you may still be 60% stocks,' said Jonathan Swanburg, a certified financial planner in Houston. If you have a 529 plan with the same target date, by contrast, 'you are likely 10% stocks and 50-60% cash equivalents,' a much more conservative mix. If you are already spending down your education savings, and you opted for age-based allocations, then your funds are probably invested conservatively. The stock-market downturn may have little effect. Even if the account has lost some value, remember that 'you won't need all of the money on day one of college,' Lazaroff said. Pace your spending, and give the market time to rebound. If your education savings have lost significant value, and you're spending the money now, consider alternatives to withdrawing the money. 'Can you pay your tuition out of pocket while your account recovers?' Lazaroff said. Perhaps you can pay for the current semester in installments, drawn from your checking and savings accounts. 'The most important thing is not to panic and go to all cash,' Lazaroff said, liquidating a 529 or Coverdell while its value is down. If you are able to leave some or all of your 529 funds untouched, Swanburg said, then think about keeping the money invested, ride out the down market, and 'use it for your child's future Roth contribution, rather than tuition,' taking advantage of a recent change in investment laws. You can also move the money "from one sibling to another," Dwyer said. If you can keep education funds invested during a down market, you can spend them on a younger child when their value recovers. Many investors choose to ignore target dates in 529 plans and allocate the money themselves. If that's your situation, you may want to take a hard look at your investments right now. If your 529 plan is invested entirely in cash or cash equivalents, then the current market could present an opportunity to invest some of the funds in stocks. 'Things are on sale,' Lazaroff said. 'You can buy the same shares for less dollars.' Remember, however, that you are generally allowed to change investments within a 529 plan only twice per calendar year, or when you change beneficiaries. When the market is volatile, that constraint could be a good thing, because it hinders investors from making impulsive changes, said Greg McBride, chief financial analyst, personal finance, at Bankrate. 'I think, by nature, that sort of helps enforce the hands-off, ride-out-the-volatility advice,' he said. This article originally appeared on USA TODAY: What to do with a 529 college savings plan as the market swoons
Yahoo
17-03-2025
- Business
- Yahoo
Pentagon Federal Credit Union (PenFed) review 2025: A top military credit union anyone can join
Summary: Established in 1935, Pentagon Federal Credit Union (PenFed) has an open-membership charter and is the second-largest credit union in the U.S. PenFed stands out for its wide variety of bank accounts and loan products, its minimal fees on checking and savings accounts, and its low deposit requirements. PenFed was ranked among our top 10 credit unions of the year and 5 best banks and credit unions for military. PenFed offers a 0% interest, Free Checking account that has the basic features you might get with any other checking account. You only need to deposit $25 or more to open Free Checking, but there's no minimum balance requirement and no monthly fees. One thing to look out for with their checking accounts, however, is the overdraft protection terms. If you attempt an overdraft, PenFed will either draw from savings (without charging you a fee) or, for overdrafts over $300, they may offer you a line of credit. But beware, that line of credit comes with a 17.99% interest rate. Read more: Overdraft coverage vs. overdraft protection: What's the difference? PenFed's Access America Checking account requires a little more maintenance than the Free Checking option, but it also pays 0.35% when you carry a balance between $20,000 and $50,000. To avoid a $10 monthly maintenance fee, you need to either keep a daily balance of $500 or make a $500 direct deposit each month. You can become a PenFed member by depositing just $5 to their Regular Savings account. But there aren't many advantages to choosing this account over their other savings product (Premium Online Savings) since the APY is just 0.05% and the account lacks stand-out features. Read more: 7 credit unions anyone can join Another pathway to membership at PenFed is to open their Premium Online Savings account and deposit at least $5. This account is the better of the two savings options since it pays 2.90% APY on all balances. Money Market Certificates: Similar to a traditional certificate of deposit, these accounts require a minimum opening deposit of $1,000. IRA Certificates: This account mixes the features of a CD and an IRA with certain tax benefits, depending on IRA type. Coverdell Education Certificate: You can open a Coverdell certificate with just $500 and contribute as much as $2,000 a year. Unlike other types of CDs, returns on these certificates are not taxed if they're used for education purposes. Read more: What is a share certificate? Power Cash Rewards Visa Signature Card: This cash-back card earns 1.5%-2% on all purchases with no annual fee. Pathfinder Rewards Visa Signature Card: PenFed's travel rewards card offers up to four points on purchases and a variety of travel perks for an annual fee of $95. Platinum Rewards Visa Signature Card: Cardholders earn points on gas, groceries, restaurants, and more with this $0 annual fee rewards card. Gold Visa Card: PenFed's balance transfer card gives you 0% APR on transfers for 15 months, with a 3% balance transfer fee. After the introductory offer ends, APR on the card jumps up to 17.99%. Home: PenFed offers conventional mortgages, VA loans, FHA loans, jumbo loans, refinancing, and HELOCs. Their conventional mortgages are available for credit scores around 650 or higher with rates starting at 6.26% APR and origination fees ranging up to $1,995. Auto: Loans are available for new and used cars and auto refinancing. New car loans range from $15,000 to $150,000 and rates start at a low 4.09% APR. PenFed also offers a car-buying service, gap insurance, and extended warranties. Personal: Loans up to $50,000 are available with no collateral and no origination fees. Rates range from 8.99% to 17.99%. Student: PenFed doesn't directly offer student loans, but they will submit your student loan application to Sparrow, a partnering online loan marketplace. If low fees are your priority, PenFed is a solid option to consider. This credit union has both checking and savings accounts that come with $0 monthly fees, regardless of your deposit amount. PenFed also has no application fee for auto loans, and members can choose from 85,000 fee-free ATMs. Pros: Anyone can join: Unlike most credit unions, anyone can join PenFed, regardless of where they live or work. You just have to deposit at least $5 in a PenFed savings account. No monthly account fees: PenFed has both a checking and a savings option that come with no monthly maintenance fees. Large ATM network: If you can't make it to a branch, you can still use one of over 85,000 fee-free ATMs to access your accounts. Cons: Some overdrafts are subject to 17.99% interest: An overdraft of $300 or more is subject to approval and can be converted into a line of credit with a hefty 17.99% interest charge attached. Higher savings and CD rates are available elsewhere: Although the credit union offers some high-yield deposit accounts, their rates aren't as high as some other banks and credit unions. PenFed's hours of operation are somewhat limited. They're open and available for customer service Monday to Saturday, 8:00 a.m. to 8:00 p.m. (ET). Here's how you can reach out for support: Member Service: 1-800-247-5626 Mortgage and home equity applications: 1-800-970-7766 General correspondence: Box 1432, Alexandria, VA 22313-2032 For digital banking, members can use Zelle for online transfers or download PenFed's iPhone or Android apps, both of which are rated over four stars by users. However, a handful of recent reviews say the apps can be very slow and account notifications are inconsistent. Read more: 10 best mobile banking apps of 2025 PenFed Credit Union has a strong focus on supporting members of the military. Its PenFed Foundation is a nonprofit agency that offers grants to service members and supports veteran-owned businesses and entrepreneurs. PenFed also donates to organizations that serve military members, such as Canine Companions and Willing Warriors, and the credit union actively seeks to hire members of the military. The easiest way to become a PenFed member is to submit an online application for a savings account and then deposit $5 to your account. You can also become a member by applying for an auto loan or mortgage, since PenFed sets you up for membership during the application process for these loans. Yes, PenFed is a National Credit Union Administration (NCUA) insured credit union. Your deposits are protected up to the federal limit. The ABA routing number for PenFed is 2560-7844-6. PenFed membership is open to anyone. To join, you must open a savings account and deposit at least $5. Navy Federal Credit Union is the largest credit union in the U.S., followed by PenFed.
Yahoo
02-03-2025
- Business
- Yahoo
9 Tax Breaks the Middle Class Should Know Of
Paying taxes is never fun. But if you're part of America's middle class — defined as those who earn between two-thirds and double the median income — you could qualify for some tax breaks. Read More: Find Out: From tax deductions that lower your taxable income on a dollar-per-dollar basis to tax credits that reduce your tax liability, here are some tax breaks the middle class should know about. Did you pay education costs last year? You could be eligible for a tax break or two. 'There are almost too many tax breaks related to education to keep track of,' said Mark Luscombe, CPA and principal analyst at Wolters Kluwer Tax & Accounting. 'There are 529 plans and Coverdell Education Savings Accounts for tax-favored funding of future education expenses.' With a 529 plan, your contributions aren't tax deductible, but they can earn interest. You can use that money on qualified education expenses without paying federal tax. A Coverdell education savings account is also meant for qualified education expenses. Contributions aren't tax deductible, but distributions are tax-free when used for education expenses. Others education tax breaks include: American Opportunity Tax Credit: A maximum $2,500 per eligible student to help with the first four years of higher education costs. Lifetime Learning Credit: $2,000 tax credit to offset the cost of undergraduate, graduate and professional degree courses. It can also help with job-related education. Student loan interest deduction: If you've paid student loan interest, you could deduct up to $2,500 in interest paid during the year. U.S. Savings Bonds: Some savings bonds qualify for a tax break when used to pay tuition and other qualifying education expenses. Income limits and other criteria apply. Discover Next: If you're a middle-class business owner, you could potentially qualify for a tax break by switching from an S-Corp to a C-Corp. 'Since the [Section] 199A deduction hasn't really kept up with inflation, every year there are more taxpayers I see who would benefit from a C-Corp rather than an S-Corp,' said Crystal Stranger, senior tax director and CEO of OpticTax. This tax break works for upper-middle-class taxpayers, too. 'For upper-middle-class taxpayers, the tax rate is often lower, especially if there are international sales that will qualify for the 13.125% effective tax rate after applying the Foreign Derived Intangible Income discount,' said Stranger. 'And when selling the company only C-Corps are eligible for tax-free gains with the QSBS deduction, and S-Corp owners miss out.' There's also a tax break for saving for retirement. For example, you could get the Saver's Credit for contributing to a 401(k). This credit is up to $2,000 or $4,000 if married filing jointly. The exact credit amount depends on your income. Contributing to other accounts, like an IRA, could also get you a tax break. Any contribution to a Traditional IRA is tax-deductible. Annual contribution limits depend on the year and your age. For 2024, you can contribute up to $7,000 or $8,000 if you're 50 or older. As per IRS rules, you can deduct up to 50% of your adjusted gross income (AGI) in charitable contributions. Some people can only deduct 20% to 30%. To count, those charitable contributions must be made to a qualified organization like a public charity or private operating foundation. You'll also need to itemize deductions, rather than take the standard deduction. More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on 9 Tax Breaks the Middle Class Should Know Of Sign in to access your portfolio
