Grandpa’s Scholarship
Howard Rohleder | Mar 23, 2023
WHAT SHOULD I DO with the required minimum distributions from my rollover IRAs? I’m age 65, which means that—under last year’s tax law—I must begin taking taxable distributions in 2030, the year I turn 73. I’ve been looking at my retirement cash flow, and it appears that my wife and I won’t need the money for our living expenses. I’m investigating using the money to help fund my grandkids’ college education. I built a spreadsheet that maps my age against the age of each grandchild and determined the years they’re expected to attend college. Using an online calculator, I estimated my required withdrawals and dropped those amounts in. Currently, the six grandkids range in age from two-year-old twins to 11. My thought is to pay substantially all the cost of their junior and senior years. The kids are evenly spaced. Other than the twins, no two will have upper-class standing in the same year. I have 529 college-savings accounts for each child. Based on my current contribution levels, those accounts could be exhausted in their freshman years. Fidelity Investments’ college planning tool suggests that the average public university might cost $28,000 a year by 2031, which is when our oldest grandchild would be a freshman. The average private school might cost $64,000 by then. These costs inflate to $35,000 and $80,000, respectively, by 2038, when the twins are projected to begin college. Of course, these costs are only averages and could vary sharply depending on the specific school the grandchildren attend. On top of that, Fidelity is inflating current college costs by just 2.5% a year, which may be too conservative. For comparison, I’ve looked at the current cost of attending the private colleges my two children attended, as well as public universities in the states where the grandchildren live.…
Read more » Look All Ways
Howard Rohleder | Nov 20, 2023
WHAT HAPPENS WHEN you’re hit by the proverbial beer truck? Will it be easy for others to pick up the pieces—the pieces of your financial life, that is? To my knowledge, my wife isn’t checking the delivery schedule for the Anheuser-Busch brewery here in Columbus, Ohio. Still, she’s worried about the complexities of our finances. I’ve made a concerted effort since I retired to consolidate and close financial accounts, reduce our investments holdings, and streamline where it makes sense. Here are nine steps I’ve taken: I had two 403(b) accounts that I rolled into a single rollover IRA at Fidelity Investments. I combined two Roth IRAs into one. I had three regular, taxable investment accounts that I’ve consolidated into one. I’ve closed credit and charge card accounts that didn’t offer any notable advantages. I drew up a letter of last instruction, including a checklist with key contacts. Since I no longer have a paycheck to protect, I’ve allowed my disability and term life insurance to lapse. I drained a small 457 deferred compensation account, realizing the taxable income prior to starting Social Security benefits. Social Security will boost my taxable income, and that meant my 457 would have been taxed at a steep rate if I’d waited to empty the account. After I retired, I inherited a tax-deferred annuity. As with my 457 account, I opted to have the full balance paid out prior to starting Social Security. I evaluated our mutual fund holdings to identify funds with overlapping objectives, and then consolidated money into the more promising fund. As part of this process, I reallocated significant sums from actively managed funds to broad market index funds. Despite my focus on consolidation, I’ve allowed some new accounts to creep in: My former employer offered to buy out my defined benefit…
Read more » A Difficult Choice
Howard Rohleder | Nov 27, 2021
FEAR OF MISSING OUT, or FOMO, seems to be everywhere. We suffer it when we read about our friends’ fabulous experiences on social media. We can also suffer it when investing, as we fret that our friends are making more on their investments than we are. My own concern in recent months, however, hasn’t been FOMO, but FOLB. No, it doesn’t roll off the tongue like FOMO. It’s my own invention—and it stands for fear of losing big, a particular worry of mine. The U.S. stock market is near record highs. With my regular rebalancing, my stock allocation sits at 60%. When I look at the dollar value of that 60%, and think about the possibility of losing 30% to 40% of it in a bear market, I hear alarm bells. When I focused on the percentage I had in stocks, I thought I could weather a bear market. But I’d lost sight of the total dollars at risk. Losing 30% to 40% of that money doesn’t feel nearly as manageable. That’s why I’ve let my stock allocation trend down from 64% a year ago. I’ve lived through several bear markets. I’d learned to look at them as buying opportunities. I also have sufficient cash reserves to go several years without having to sell a stock or stock fund. Theory says that as long as I don’t sell after a big drop, the possible paper loss is irrelevant. I can add to my positions while the market is down, and the next bull market will make me whole again and then some. These thoughts should be comforting. But the sheer magnitude of the potential dollar loss is disquieting. The other concern I have: There are few good alternatives to owning stocks. Cash earns next to nothing. Bonds have the potential…
Read more » The Mary Jean List
Howard Rohleder | May 25, 2023
MY FATHER-IN-LAW Carson was a stereotypical engineer—organized and precise. All four of his children know the motto “measure twice, cut once.” Carson applied these traits to his finances, which he managed on behalf of himself and Mary Jean, his wife. Mary Jean depended on this. As they aged, Carson maintained his mental acuity, but he was the first of the two to deteriorate physically. Mary Jean was strong physically but slowly surrendered to Alzheimer’s. Before her diagnosis, Carson made a concerted effort to teach Mary Jean how to manage their finances in case, someday, she might have to do it on her own. They had an investment manager, so the actual investing was taken care of. Carson wanted her to be able to navigate the banking, bill paying and check book. With an engineer’s precision, he created a list instructions laying out who to contact and how to handle the monthly financial chores. It became apparent that this wasn’t going to work. Possibly due to the early effects of as-yet undiagnosed Alzheimer’s, Mary Jean couldn’t grasp what needed to be done. That was when he turned to us. I wrote a HumbleDollar article based on what we learned from this experience. Carson’s list, which my wife and I referred to as the “Mary Jean list,” guided us when he passed away. It was such a good idea that we adopted it ourselves. Enshrined in a manila folder in the front of our file cabinet is a three-page list of steps and instructions for my wife to follow, should I die first. Just over a page is devoted to 15 steps. Each step refers to an individual contact: attorney, accountant, investment company, bank, insurance agent, pension, Social Security, health insurance… the list goes on. There’s a name, a phone number, questions…
Read more » Share This Message
Howard Rohleder | Jan 3, 2026
In my years working in Hospital Administration, I routinely had staff telling me about patients or families caught in a medical crisis caused by a fall or major surgery or simple aging. They were “surprised” to find that when they were told they could no longer live safely in their home, that Medicare was not going to pay for their needed long term care living arrangements. I’m assuming that this information will not be a surprise to Humble Dollar readers. But I found this post on Linked In from a Senior Care Educator and Advocate named Katie Monahan Brooks, CDP, DCS. I don’t know her and I don’t know the Humble Dollar policy about reposting what she posted on Linked In. But she has expressed this more clearly and bluntly than I could have. And, it is apparent from her writing that she wants this message broadcast far and wide. My hope is that Humble Dollar readers can be part of this education process. Here is what Ms. Brooks wrote, unedited by me: “I’m done pretending this confusion is acceptable. If I have to explain one more time that Medicare does NOT pay for senior living, I might actually lose what’s left of my sanity. Let’s be painfully clear: Medicare pays for your medical care. It does NOT pay for your housing, daily care, or supervision. Assisted Living, Memory Care, and Independent Living are NOT medical benefits. They are housing with support. And yet—every. single. week.—I sit across from families who are shocked. Angry. Betrayed. “Why doesn’t Medicare pay for this?” “Isn’t this healthcare?” “No one ever told us this.” And that’s exactly the problem. This isn’t just a misunderstanding. This is a massive, nationwide education failure that leaves families blindsided in the middle of a crisis—when emotions, guilt, fear,…
Read more » One Step at a Time
Howard Rohleder | Nov 3, 2021
IN MY LATE 20s, I found that I was 15 pounds heavier than when I was in high school. My cholesterol was over 200 and rising. I was huffing and puffing while mowing the lawn. I didn’t like where this was going, plus I didn’t want to buy a new set of business suits. I decided that investing in my health was as important as investing for my wealth. If my health was shot by the time I retired, my wealth would bring me less happiness. To get started, I applied the concept of continuous quality improvement (QI) to my goal of becoming healthier. QI is practically a religion in health care, where I worked for 30 years. The notion originated in Japanese manufacturing. The idea: continually add incremental value for the customer. One model for QI is the PDCA (plan, do, check, act) cycle. Once an opportunity for improvement is identified, you push it through these four steps: Brainstorm how to make it better (plan) Implement your best ideas for improvement (do) Use data to evaluate whether you’re truly adding value (check) Adjust based on data-driven evidence of what works and what doesn’t (act) One thing I like about this approach: It allowed me to take small steps. I’ve noticed that big lifestyle leaps often aren’t sustainable. Just as success in personal finance can be achieved by simple, inexpensive processes followed diligently over a long period of time, improvements in personal wellness can be achieved in much the same way. I didn’t have a lot of extra time, and it was the middle of winter. My plan was to wake up 20 minutes early to jump rope. I started slowly, but eventually could jump rope for the entire 20 minutes. No trainer would want this to be your only…
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Dickie and his magic beans
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Saving for Grandchildren
ArticleJohn Yeigh | May 2, 2026
- Tax-free growth when used for qualified education expenses
- High gift-tax contribution limits: $19K per contributor per year (indexed)
- New ability to convert up to $35K into a Roth IRA for the beneficiary
Cons- Relatively complex with penalties and taxes on non-qualified withdrawals
- Limited, state-approved investment options
- Risk of underutilization if the child does not pursue qualifying education
Caveats- Technology and AI could significantly reduce education’s cost structure in the future
- Roth conversions are capped at $35K lifetime
- The 529 must be open 15 years, and contributions must age 5 years before conversion
- Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
- Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years
UGM Custodial Accounts Pros- Brokerage account where up to $2.7K of unearned income can be tax-free each year
- High gift-tax contribution limits: $19K per contributor per year (indexed)
- Broad investment flexibility — stocks, bonds, funds, etc.
- Few restrictions on how funds may be used for the child’s benefit
- Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24
Cons- Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
- Assets count as the child’s for financial-aid purposes
Caveats- Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years
Coverdell Accounts Pros- Tax-free growth for qualified education expenses
- More flexible investment choices than most 529 plans
Cons- Low contribution limit: $2K per year plus income limits restrict who can contribute
- Essentially irrelevant today given the expanded options within 529 plans
Trump Accounts Pros- $1K government seed deposit for children born 2025–2028
- Contribution limit of $5K per year in 2026, indexed to inflation
- Parent employers may contribute up to $2.5K per year (also indexed)
- Tax-deferred growth with Roth-conversion opportunities beginning at age 18
- No earned-income requirement for Roth conversions
- Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
- Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).
Cons- Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
- Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
- Limited custodian control and intervention possibilities if the teen is a wild-child
Caveats- If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
- Watch this space as future adjustments or eligibility changes are possible
In effect, the 529 is a two-decade college savings program having some complexity and withdrawal limitations; the UGM is a reasonably flexible, 18-30-year college or house downpayment savings program; and the Trump account is a somewhat inflexible, sixty-year retirement accelerator. Resulting Playbook Here is our family’s intended playbook for tax-advantaged accounts in the grandchild's name:- Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
- A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
- Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions.
- The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
- The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.
For the UGM account, a balance of $35K should capture a sizeable chunk of the annual $2.7K tax-free income limit by investing in high-yield income alternatives. For the 529 account, $35K aligns with the Roth conversion limit. On a personal note, we had extremely positive UGM outcomes with our children. We saved taxes for two decades, and each child used the ~$60K balance as down payments on their first house shortly after college. Due to the 529’s withdrawal rigidities and potential technology impacts, we are unlikely to fund the 529 to the max.- We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+).
- Depending upon spare resources available for gifting, we can always reassess future contributions.
That’s our plan, and we’re sticking to it…. until something changes.Living On Autopilot
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Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
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