Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

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Rick Ferri
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Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by Rick Ferri »

I'm talking taxes with Phil Demuth, Ph.D. He is Managing Director at Conservative Wealth Management, LLC, and the author of nine personal finance books, most co-authored with his pal, economist Ben Stein. Here is the link to the podcast:

Episode 032: Phil DeMuth, host Rick Ferri

Phil has written for the Wall Street Journal, Barron’s, Forbes, the Journal of Financial Planning, Human Behavior, and Psychology Today. He has been quoted in the New York Times, the Financial Times, Yahoo! Finance, On Wall Street, Fortune, Research Magazine, Investor’s Business Daily, Motley Fool, theStreet.com and he has been seen on various TV shows, including CNBC’s Worldwide Exchange, On the Money, Squawk Box and Closing Bell, as well as Fox & Friends, Wall Street Week, and Consuelo Mack WealthTrack.

This podcast is hosted by me, Rick Ferri, a long-time Boglehead and investment adviser. It is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. Your tax-deductible donation to the Bogle Center is appreciated.

Enjoy!

Rick Ferri
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L82GAME
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by L82GAME »

Another great podcast! Thanks, Rick.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by KansasDoc »

Rick,
Another fantastic podcast. I listen to all your guests but found Phil’s message timely as I am working on tax planning.

It was mentioned the practice of super funding 529 with the expectation of paying a penalty in the future [withdrawal for non-education expense].

I guess the calculation would just come down income tax now vs income tax then. As it is likely the 10% penalty would be less than long term capitol gains tax.

Thanks for all you do for the boglehead community Rick!
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by Stinky »

Excellent podcast.

Thanks for hosting this series.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by Mike Scott »

Thanks for the podcast!
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

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KansasDoc wrote: Mon Apr 05, 2021 7:08 am It was mentioned the practice of super funding 529 with the expectation of paying a penalty in the future [withdrawal for non-education expense].

I guess the calculation would just come down income tax now vs income tax then. As it is likely the 10% penalty would be less than long term capitol gains tax.
The gain is ordinary income, plus 10% penalty, so this strategy is limited to those who have very low income in retirement.

Rick
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by donaldfair71 »

That was yet another outstanding episode.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

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The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by codedude »

Thanks Rick. Loved listening to both you and Phil. Phil’s new editions of the tax alpha dog book are always eagerly awaited for.
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by WoodSpinner »

Rick,

A big fan of your Podcasts and I think achieving
Alpha
via Tax Planning is a really good investment in time, energy and money. Thanks for bringing on a very knowledgeable guest to discuss the topic.

That said, this interview had a really different flavor than your previous podcasts. For one, you spent a great deal of time laying out your thinking on the issues as opposed to your guests doing the talking. No quibbles with the advice given but more with the role of Host vs. Guest in terms of teeing up questions and illiciting responses.

I suspect this is an are that you also know really well and that shifted the dynamics.

FWIW, I learned a few tips in managing 529s and planning for grandchildren that haven’t been conceived (my DD will be rolling her eyes and shaking her head) at this point.

Thanks again.

WoodSpinner
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by Grt2bOutdoors »

This was an excellent and informative podcast. Thank you Rick and Phil DeMuth!
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by is50xenough »

Rick Ferri wrote: Tue Apr 06, 2021 11:58 am
KansasDoc wrote: Mon Apr 05, 2021 7:08 am It was mentioned the practice of super funding 529 with the expectation of paying a penalty in the future [withdrawal for non-education expense].

I guess the calculation would just come down income tax now vs income tax then. As it is likely the 10% penalty would be less than long term capitol gains tax.
The gain is ordinary income, plus 10% penalty, so this strategy is limited to those who have very low income in retirement.

Rick
How about kid withdrawing early in career right after college and they pay the ordinary income plus penalty?
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by imbogled »

👍👍 Thanks Rick! I found the podcast very helpful. Looking forward to the next one. Keep up the good work. Now if I can only find away to get rid of that opening tune of the podcasts earworm.

Imbogled

Ps I enjoy a podcast called "Ready For Retirement" by James Conole CFP. I think he has alot of Bogleheads blood in him.
https://readyforretirement.co/podcast/
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by Thomas93 »

is50xenough wrote: Wed Apr 07, 2021 11:05 am
Rick Ferri wrote: Tue Apr 06, 2021 11:58 am
KansasDoc wrote: Mon Apr 05, 2021 7:08 am It was mentioned the practice of super funding 529 with the expectation of paying a penalty in the future [withdrawal for non-education expense].

I guess the calculation would just come down income tax now vs income tax then. As it is likely the 10% penalty would be less than long term capitol gains tax.
The gain is ordinary income, plus 10% penalty, so this strategy is limited to those who have very low income in retirement.

Rick
How about kid withdrawing early in career right after college and they pay the ordinary income plus penalty?

If you start a 529 for someone else as a beneficiary and it is overfunded and they use some of the money for college, what would happen if they withdraw the rest during college when they had no income. It would be taxed at income the beneficiary's income rate plus 10% penalty? I assume it would not be taxed at the income rate at the funder?
is50xenough
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Re: Talking Taxes with Phil DeMuth on the April "Bogleheads on Investing" podcast

Post by is50xenough »

Thomas93 wrote: Wed Apr 07, 2021 3:47 pm
is50xenough wrote: Wed Apr 07, 2021 11:05 am
Rick Ferri wrote: Tue Apr 06, 2021 11:58 am
KansasDoc wrote: Mon Apr 05, 2021 7:08 am It was mentioned the practice of super funding 529 with the expectation of paying a penalty in the future [withdrawal for non-education expense].

I guess the calculation would just come down income tax now vs income tax then. As it is likely the 10% penalty would be less than long term capitol gains tax.
The gain is ordinary income, plus 10% penalty, so this strategy is limited to those who have very low income in retirement.

Rick
How about kid withdrawing early in career right after college and they pay the ordinary income plus penalty?

If you start a 529 for someone else as a beneficiary and it is overfunded and they use some of the money for college, what would happen if they withdraw the rest during college when they had no income. It would be taxed at income the beneficiary's income rate plus 10% penalty? I assume it would not be taxed at the income rate at the funder?
If finder is parent, presume yes at rate of funder given kiddie tax rules?
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