Welcome back to Ask the Compound where our audience is getting smarter. It's kind of like the alien in the movie, you know, where it's like evolving over time and getting smarter. They know how to ask questions to pull my little heartstrings. They know which questions I'm going to answer.

So we got some today that I swear we're just, it's like the Ben AI chat bot. Like we know what Ben's going to pick here. If you start off with love you guys, you've immediately got my attention, you know. So we have a dock full of, I don't know, a hundred questions still we haven't gotten to.

We try to get to them all. But we get new ones every week and then we have the old ones and some of them just we got some good ones this week. So askthecompoundshow@gmail.com if you want to email us. This morning in my email inbox I got a January financial report from Rocket Money, who's the sponsor of the show today.

So how much I spent last month, the percentage change from what I normally spend, the largest transaction, which I think was plane tickets maybe, and the percentage of income that I spent, right. Here's your income, how much you brought in, here's how much you spent as a percentage. It also shows the biggest category changes in spending.

So travel, shopping, eating out, etc. Was it higher or lower from the month before? Pretty cool. So Rocket Money is the personal finance app that lets you find and cancel your unwanted subscriptions, monitors your spending, helps you lower your bills. Five million users on Rocket Money and it's saved members an average of $720 a year, over $500 million in canceled subscriptions.

It's even more money than I've saved on my cable bill over time. Stop wasting money on the things you don't use. Cancel your unwanted subscriptions by going to rocketmoney.com/atc for Ask the Compound. That's rocketmoney.com/atc. Click the link on YouTube. I love Rocket Money. Duncan, everyone wanted to know why you're not wearing a suit today.

Duncan and I were at the New York Stock Exchange the other day, and he put me to shame because he wore a suit and tie. I walk into the office, I'm wearing a sweater and a nice, you know, I don't wear a tie anymore. I gave up on it in COVID.

I just decided ties are, I think I threw them all away. You looked very fashionable. I had a sport coat on, but you put me to shame because people thought you worked on Wall Street. No hat, hair slicked back. Very nice. Thanks. My hair was probably not very dressy.

My wardrobe is binary. I have flannels, and then I have a suit. I don't really have many in-betweens. It's either I'm dressed up or I'm not dressed up. It's like my portfolio. It's a barbell. It is funny, though. Someone on the train started talking to me the whole way back about equity swaps.

For real. I've worked to the part, I guess, you know. All right. Questions? First, before we dive into that, I was going to say a little cross-promotion. Everyone should check out Ben's blog, Wealth of Common Sense. I love this thing you wrote, "17 Thoughts About Money." I just wanted to share a couple of them.

That's all really good. The second one, you have, "Money can't buy happiness," is something only rich people say. So true. People with money say that. Right, exactly. People always say that. What they mean is money is not going to be the thing that makes you happy. It's not going to fill a hole.

Right, and that's true. Only wealthy people say that. It's going to make your life a lot easier, though. Right. No one's happy when they're worried about how they're going to pay their next bill or that kind of thing. The other one I really liked was, "True money contentment comes from accepting people dumber than you will be richer than you." You just have to get over that.

Sometimes people are going to make a bunch of money on some cryptocurrency that you missed, and you just have to be okay with that. Circumstances, luck, whatever it is, you can't let that grate at you. It's like the thing, someone's always going to be smarter than you. I always say that about investing.

It's like the opposite with money. There's someone dumber than you. You're like, "How is that person so much richer than me?" Guess what? You just have to live with it. It happens. Yeah, it's life. I also like number eight, "Most problems that can be solved using money aren't real problems," and you go on to say how it's nothing compared to a health scare or things like that.

That's stuff that really put it into perspective. Yeah, and then last but not least, I really loved the number 16, "People who act like they have it all figured out are usually full of shit." That's true. Yeah, most people would agree with that. Good list. Because the truth is, no one has it figured out.

I don't care how well-versed you are or how smart you are, no one has it all figured out. Very true. Good post, though. I like that. Appreciate it. Alright, let's do a question. Alright, up first today we have a question from David. "We wanted to start investing in a college account for our new granddaughter with regular deposits.

Is 60/40 the best approach for a college account? That's what we would do on Reflex, but wanted to get your thoughts. Sounds simple, but if that's the answer, what's in the 60 and what's in the 40? And should it be passive or actively managed in some way, like simple rebalancing annually?" This actually raised a question I was going to follow up with you on.

Is it considered active if you just rebalance annually? No, that's part of your allocation. I mean, whatever. Every decision is active if you want to really split hairs here. But I love where David's head is at here. I'm not going to lie. I gave some not-so-subtle hints to my parents and the in-laws that hint, hint, wink, wink.

You don't have to buy toys all the time. We can also do 529 contributions. That was made clear. It's very easy, actually. The Michigan 529 plan makes it easy for someone to gift a 529 contribution. Obviously, I have three kids. Putting them through college is not going to be cheap.

Plus, we have twins who will be attending at the same time. I think my oldest daughter will be a senior when the twins are freshmen. So, we'll have three kids in college at the same time. And the grandparents have come through. Our provider at Michigan, they have a bunch of different investment options.

Now, you can pick those investment options yourself, which is easy. Some people just pick a simple total stock market index. Ours is mostly index funds. A lot of it depends on what state you're from. So, I would first check with your own children to see if they have a 529 plan set up in the first place.

Maybe they've already made elections for investment options. But if not, we all know I'm a big target date fund guy. We practice what we preach here in the compound. I invest in index funds and target date funds. Duncan invests in stocks that fall 98%. Sometimes. Sometimes go up, too.

Sometimes go up, too. That's true. Depends when you start. So, the Michigan 529 plan has these investment options that are based on the year the child will be starting school. And it's just a target date fund. I looked at the Michigan options, and they range from 20 to like 2080.

And I looked at the one for my daughter. She's going to be 10 this year, which is mind-boggling. This is something all parents have to say. Like, I can't believe how quickly the time went. It's also true. And I think hers is 60/40. And it's a mix of U.S.

stocks, international stocks, REITs, TIPS, total bond market fund, and corporate bonds. So, it's pretty well diversified. It rebalances automatically. And it also has the glide path where it slowly gets more conservative as you get closer to the age. So, I like that option. It just does it for me.

So, it's an active thing, but it's got the glide path. You could always make it more risky if you wanted to go further out. Like, pick a year that's further away. More conservative if you want to pick a year that's closer. But that's the thing for me that would be easiest.

You don't have to get in there and tinker. Especially if it's going to be for your granddaughter. You want to be like, try to actively manage this. That way, you know when they're there. She's at college age. It's going to be relatively conservative, so the money's there to be spent.

So, I like that option. But yeah, talk to your kids first. It's not the perfect option, of course. You could say, well, there's ways to do better. But the beauty of it is it's automated. It's simple. It's well diversified. Michigan probably has a top quartile 529 plan. So, I would check which state you're in, or your granddaughter's in, to make sure they have similar offerings.

But that's what I do. And I think it's easy. That's a big part of it to me. I didn't realize if I changed state by state. Yeah, depending on the state. Which kind of stinks. They should have the same all over. But Morningstar does these rankings where they do gold, silver, bronze, I don't know, coal for the worst ones.

But Michigan's probably, yeah. It's like a silver, so it's pretty good. But some states are better than others. Not really a thing where it pays off for the risk of picking a bunch of risky stocks. Yeah, I don't think you want to go out on a limb. But this sort of thing, as far as your grandchildren are concerned, that's a great gift.

That's the gift that keeps on giving. Yeah, though you can't roll it around on the ground like a cool car or something. When they're walking down the aisle some day with their tassel and gown on, they'll be thankful. When those student loans aren't as big. Alright, next question. Alright, up next we have I like this question.

This is a cool question. This is the one. This person put this question in specifically for me. Yeah, right. They know their audience. I love the question because it hits on so many. I was born for this question, basically. Expensive trucks, compound interest, young people making terrible financial decisions.

And I love the way that Jim put it here. The sequence of spending risk. I don't want to spend shame people and say, "You shouldn't buy this $70,000 truck." If you can afford it, fine. But especially when you're young, that makes a huge, huge difference. Especially if you're not saving that much.

So I've written a number of posts over the years about excessive spending on trucks and SUVs. So I asked if a Ford F150 is partially responsible for the retirement crisis. I think I wrote a piece called For people new here, Ben hates big vehicles and expensive vehicles. So an expensive truck is just like, you know, that's the worst.

I don't hate them. I just hate them for certain people. Alright? Again, I'm not a fan of spend shaming unless you're spending way too much and you're not saving any money. And if you take up too many parking spots. Listen, the two biggest fixed expenses you have are housing costs and transportation for most people.

Right? It's not the lattes. It's not the brown bag lunches. It's not Netflix streaming services. It's the big expenses. And if you lock yourself into a four-figure car payment for a truck because you want to be cool and it makes you feel better, I can't get on board with that.

Okay. So I poked around a little bit and I found new car loan rates at like 6%. Probably 6-7 depending on your FICO score. Financing a $70,000 truck. No down payment over 5 years at 6%. That's a monthly payment of $1,350. That's an obscene amount of money for young people.

I love the way that they frame this because they say young people, right? This is a person who's a little wiser, understands saving. They know that that's a ridiculously high monthly payment, especially for a young person because of the opportunity cost. So let's say, let's just say instead of that Ford F-150 or Dodge Ram, you got yourself a reasonably priced SUV, say like a Ford Explorer, Chevy Trailblazer.

Now we're talking $30,000, $35,000 maybe. That cuts it in half. And let's be honest, if you're a young person, you don't need all the bells and whistles in a car. You don't need the sunroof. You don't need the leather seats. You don't need the heated steering wheels. Oh, heated steering wheel in Michigan in the winter, I gotta say, is one of the best inventions of the past, however long it's been around for.

It's amazing. I'm new to that. I'm new to that life. Our new vehicle has heated steering wheel. I love it. That's great. The thing is, once you get those things, you are, that becomes a necessity, not a desire anymore. So once you get it, there's no going back. So just take away all the amenities at first, right?

So if you cut it in half, go from $70,000 to $35,000, now we're talking like $675,000 a month in savings. It's $8,000 a year, $40,000 over the life of the loan. I also looked at, what about a smaller truck? John, show a picture here before we get to this table.

This is the Ford Maverick. Let's say, okay, listen, I'm in construction. I do need a truck, Ben. Okay, do you really need the biggest truck, though? This is a Ford Maverick. You know what this MSRP is for the Ford Maverick, what it starts at? $25,000. Okay? Monthly payment goes from $1,350 to $500 a month.

Now I'll show my table, John. So I've shown three different options. The souped up truck, $1,350 a month. The SUV, $675,000 a month. Then the small truck at $25,000 for the truck and like $500 a month. You're saving $10,000 in a year and $51,000 over the life of the loan for a smaller truck.

Right? Now, let's do the personal finance thing. Now let's say you take these monthly savings, right, on both of these prices. You cut it in half or you cut it even further. Let's say you save 75% of monthly payments, right? Not the whole thing. You can blow the rest.

Do whatever you want. You're a young person. Here's what those savings look like in the stock market over 30 years. 7% on that. John, show the chart. Actually, give me the other chart, the next one. Okay, so this is what happens if you just keep that lower priced car and keep the spread for 30 years, right?

You save that spread every year for 30 years. Now we're talking, you know, high six figures, $600,000 to $800,000 range. Pretty eye-opening, right? But let's be honest. That's probably not realistic. If you're a big truck person, you're going to want a big truck eventually, regardless of what the spreadsheets say.

So John, show my next chart. What if you just save for the five years? So $25,000, you know, you don't need that big souped up truck. Get the Maverick and then after five years when you're 30, then you do it. So just you save the difference for five years.

One period of the loan, right? Then you can buy your truck that'll pull a 747 down the runway. Okay? This is just one-time deal. You save 75% of the difference for just five years and let it grow. Now we're talking about the difference between that SUV or a Ford Maverick and you're saving something like $200,000, $250,000 over 30 years.

This is the money chart, right? Just one loan period. So hold off on the big truck for five years. Hold off a used car or a smaller truck or an SUV for five years. And then once you're in a better situation and maybe you're making more money, then you can get it.

Right? So that's the idea. These are the graphs that he should show his young people that, yeah, fine, get it eventually. You don't need it now. Listen, I just think, especially for young people, if you're someone who's saving money and you have your budget prioritized and you want that $70,000 truck, who am I to tell you not to get it?

But if you're a young person and you're not saving, you're not allowing compounding to do that heavy lifting for you. I say, you know, of course, the hard part is you can't simply buy a lower cost vehicle. You have to save the difference. Right? So I would just automate those savings.

You know, a six figure Roth IRA in 30 years is going to do a lot more heavy lifting for you than a Ford F-150. Right? Boom. Nailed it. I'm not trying to trigger anyone, but I see a lot of fancy, expensive trucks and they don't have a single scratch or a drop of mud on them.

I'm just saying, I don't really think you need the truck. This guy is in construction and he's saying these other construction workers don't need it. Not everyone needs the brand new top of the line. That's all I'm saying. Just do it for five years and let that money grow.

These fancy trucks, they're nice. They're like luxury vehicles. They're really fancy inside. I think a lot of people don't understand that. That's what you're paying a lot for in a lot of these cases. You're paying as much for a big truck as you are for a luxury vehicle. That's the thing.

It's huge. I'm not saying skimp for the rest of your life. Do it for at least the first one you get. Trade down a little bit and let that money grow. Don't get used to it because once you get used to it, there's no going back. Just be okay with the fact that you might end up in a situation where you can't tow a train out of the way or something.

That's true. Call one of your buddies who is not as financially sound as you. You can bail him out of a financial hole. He can bail you out of a literal hole. Next question. My wife is a physician and we're 37. We're in the 37% tax bracket. While treasury yields are currently excellent, I'm struggling to figure out how treasuries and bonds make sense for us in the near term given the tax implications and a brokerage account.

After taxes, 5% treasuries would yield us about 3.1%, barely keeping up with inflation. Outside of pure safety, why wouldn't I just invest in an already safe index fund and enjoy the 7% annual gains and take the 20% capital gains rate or just hold until we no longer have any income?

All right. A lot of tax stuff here. I want to tackle this from the investing side of things, but let's bring in not only your tax advisor, my tax advisor, Bill Sweet. We were on the phone today. Bill was working out some tax stuff for me. I was. He's a magician.

I'm always on the clock. It's true. I wanted to welcome you guys to the month of February too. February is the worst month of the year, but it's an honest month because it's a month that doesn't hold up life any better than it really is. Where's at the top of your month power rankings?

Duncan? It's definitely on the lower end. Isn't it a leap year though? It's a leap year. That's kind of cool. It is. It's a long month. Yeah, making it even worse. I would put May on the top and February at the bottom. That's the mind list. This is the kind of stuff you talk about when you're a middle-aged dad.

For the audience. Yeah, definitely. Good thing they're not changing any tax laws way into the game. Yeah, there was not a bill that passed the House last night at 8.37 p.m. The crazy thing is that it's retroactive, but that was not Sam's question here. Yeah, you're going to have to give us a rundown of that eventually.

I didn't quite get all the details. I guess the way it works is your age matches your tax bracket according to Sam. Not really. We talked before about the differences in different types of bonds for tax purposes, right? Yes. The tax notifications, muni bonds versus treasuries versus corporates, that sort of thing.

Now we're looking at treasury bonds versus taxes. You obviously know this, but make the case here for why stocks are so much of a better tax-deferred vehicle than bonds if we're investing in a brokerage account. To put things into perspective, Sam and his wife, they're 37% tax bracket. That's the top tax bracket.

These are folks earning more than $600,000 a year. God bless them. There's a lot of work that goes into that. When he said my wife is a physician, that was not to brag. Yeah, that was definitely not to brag in the tax bracket, too. But the question Sam is kind of getting at is, look, these treasury yields at 5%, they're really tasty.

Compared to two years ago, compared to any point since 1985, 1987, that's a really good yield on what the market considers a risk-free rate of return, a 30-day T-bill. However, what Sam's pointing out is, look, my tax rate, the IRS is taking more than two-thirds, or excuse me, one-third of this income.

So his after-tax rate is only 3%. I would agree. And that happens across the tax spectrum. So for somebody, Ben, earning $50,000 a year, their ordinary income rate is 12%, their capital gains rate is zero. For somebody earning $150K, it's 22% ordinary, 15% capital gains, so there's still a 7% advantage there for capital gains.

And even at higher income ranges, it goes from 37% to 24%. So you're still with a large 13% gap where you're getting a better, effective tax rate on capital gains and things like tax-qualified dividends over ordinary income. And so Sam is going down the right path. The real benefit, though, Ben, is not just in tax rates, but it's in deferral.

But it's the compounding, right? Correct. If you have a treasury that you're owning in a brokerage account, in a non-qualified account, you're paying that tax today, in 2024, on that earnings, relative to a capital gain that's getting deferred. I don't know, Ben, if it's exactly apples-to-apples, right? I don't know if you would compare a compound annual growth rate to a stock compared to a treasury yield.

You know, the treasury yield is basically guaranteed by the full faith and credit of the United States government, whereas we don't know what the next 5, 10 years of stocks are going to yield. We do know the dividend rate, so we can approximate it. But that's really the big gap, is that really you get to defer on the tax versus paying the tax now.

Right, which is one of the reasons that those tax deferred retirement vehicles are so nice. You have to pay the taxes eventually, if it's not a Roth, but you're allowing the compounding to happen. You don't have to pay taxes on the dividends every year. You don't have to pay taxes if you rebalance, that sort of thing.

Yep. You're exactly right. My question is, how often do you let the tax tail wag the investment portfolio a dog? Because I get that from a taxable perspective. Stocks look way better, but does that mean that you should just shun bonds altogether because the yields are going to be lower on an after-tax basis, and you go 100% stocks?

I don't know. I think the investing side of the equation should probably have a say here, too. Correct? Yeah, 100%. In fact, that's probably the end of this story, and that's how I would argue it. Sam, I would look at, hey, this is an investment opportunity. I'm going to own this.

Think about top-down asset allocation. Ben, you and I do this for a living. You would fail your CFP or CFA exam if you tried to hand-jam based on where the current interest rates are. You would decide, look, I want to own treasuries. I want to own stocks. Where does it make sense to own those?

I think what I would flip the argument in his head, Sam, is say, look, it would make more sense for me if I have a high income, which Sam and his wife do, and I'm earning income, I'm rebalancing, blah, blah, blah. I would want to own ordinary income devices in tax-deferred accounts because the yields are great.

We want to own that somewhere, but you want that in a tax-deferred structure anyway because then you get the higher yields in a tax-deferred account versus owning stocks and other tax-qualified assets in non-qualified accounts where you don't have to pay the tax now because of the deferral outside of dividends, and then you can pick and choose when you want to pay your tax.

Think about this top-down from a portfolio allocation, not bottom-up from this is a good investment. Also, when do you need to spend the money? Some people need to own bonds or cash because it's an emotional hedge and they can't take the volatility of the stock market, so they need to have something else that takes that volatility down a notch.

Other people, it's more for spending needs. Do you have goals coming up that you need to spend that money? I have money in an online savings account and some T-bills, and I know that that stuff is not nearly as tax-efficient, and it's not going to give me the same return over the long run as the stock market, but I don't care because it's there when I need to spend the money.

That's what you have to think about first is, "Is that money going to be there when I need to spend it?" You skipped to the point that I wanted to end on, which is these types of vehicles are great for spending your money today. If you're in distribution phase, you want this high yield.

You want this high income because the dollars are going out the door anyway. You probably do not want this type of income if you have a high savings rate. He calls index funds safe, but it's relative. They're still risky in the short term for sure. Correct. Final point for me, you do get a state tax advantage with treasuries, as we discussed on Ask the Compound '92.

Was that a real number, or did you make it up? I just made it up. I was about to say, "Wow, you've got a good memory." You got me. You guys are supposed to play along. Close enough. Next question. Up next, we have a question from Benjamin. "I'm considering maxing out 401(k) and IRA contributions for my wife and I.

My employer contributes to an ESOP." You're going to have to remind me what that stands for. Employee Stock Option Plan. That's it. And profit sharing programs as well. "I have a co-worker who claims there is a maximum amount of contributions for deferred compensation and tax advantage retirement accounts. Consequently, he avoids contributing to his IRA in case his total contributions end up being too high when combined with 401(k), ESOP, profit sharing, and other deferred comp programs the company has for high earners.

Is there any such maximum?" See, Bill, I always complain about this to you, that we should just have one big pooled maximum for everyone. But there's all these different accounts and moving pieces and 401(k) limits and IRA limits. And then there's income limits on the IRAs. And then you have SEP IRAs and individual 401(k)s and Employee Stock Option Plans.

Okay, so who's right here? Benjamin or the co-worker? Because I feel like you have to settle that debate first. Yeah, I think so. And I want to talk about a really interesting policy proposal kind of at the end. But I think the answer to Benjamin's question is it's super-duper complex.

I think that's where we would land this. Duncan, ESOP is an Employee Stock Ownership Plan. And in these types of things, integrated with a 401(k) plan, there are a bunch of limits to keep in mind. Limit number one, there's a $23,000 402(g) salary deferral limit that each person can put into a 401(k) each year.

And then there's a $69,000 this year, 415(c) limit. And the interplay of those two limits is very, very important. The 415, the 69,000, that is a hard cap, Ben. You cannot exceed that on a per-employee basis, or you have to distribute the money to the employee's benefit. In ESOP, an Employee Stock Ownership Plan, it's this really funky hybrid of equity, company stock and retirement vehicles.

And the total company contributions cannot exceed that 69,000, which also includes the 402(g) salary deferral limit. So the employee is correct. You kind of do need to know this stuff in advance. Unfortunately, most companies don't close their books until the following tax year, when it's too late to do a 402(g) limit.

My general advice would be contribute up to the maximum anyway, because the company's going to match it or not. You're just going to get the money back if it's too much. But I do want to give Ben point here at the end. And that's the IRA limits don't have anything to do with these complicated 402, 415(c) limits.

So the IRA's got nothing to do with it in my equation. So if we're doing IRA plus 401(k) plus the SEP limit, we're pushing 100(k). And that's not including any company match for the 401(k). If you balance it all together, right? And just very confusingly, a SEP IRA doesn't follow the IRA rules.

It does for distribution purposes, but not for contribution purposes. So you're even bringing a third animal into this. It's kind of crazy to me that they give business owners such a bigger break on the contribution limits. Why is it so much higher? Is this just a, who knows? Yeah, I don't have a good answer.

I think it's just the way that the tax code developed over time. And these limits were much, much smaller. And as they've compounded in inflation and Congress has tried to incentivize retirement savings, they've gotten bigger, right? But speaking of inflation, that's been a positive inflation as these contribution limits have moved up quite a bit in the last few years, right?

That's true. Fair point. Yeah. And especially if you compounded over the last 20. But yeah. At the end of the day, I think I would look at this all in, again, totality and say, look, what can I control here? You can control your own savings rate. You probably should fund the retirement vehicle.

And don't let that door close. And again, the worst case scenario, your company, oh no, your company contributes $69,000 to a retirement account on your behalf. That's a great problem to have. You're just going to take the 23K out, get a distribution, and then spend it as you see fit.

I think that's a great problem to have. Okay. That's what I was about to ask you. Whose job is it to keep track of this? Is the employer issuing this, keeping track of limits? Or you just as the individual have to keep track of all this? Yeah. No, the plan sponsor would, Duncan.

The plan sponsor, whoever's running the plan. And yeah, there are some very high income people that get paid to do all this math and to give the answer. And the reason people want to max these things out if they can is because of the tax deferral we talked about in the last question.

Correct. Yep. So it's a big deal and it's a good problem to have. But yeah, I would fund your IRA separate from any of this because IRAs, they don't come into this company in limits. Perfect. Good to know. Next one. Cool. Okay. So last but not least, we got a nice short one.

We have a nine-year-old and a six-month-old. Do I need two individual 529 accounts for them? Since they are pretty far apart, I was wondering if we can use the same account for both of them. All right. This is a quick answer. So you give it and then I got a follow-up for you.

Yeah, shoot. So the answer is, yeah, you can just use the same account during the accumulation phase. And you can name one beneficiary. 529s have an account owner that owns the account. And then they're making contributions and saving for a beneficiary. And most 529s plans allow you to change the name of that beneficiary at least once a year.

And so in theory, during the accumulation phase, Ben, let's say the first 18 years of a child's life, you can contribute to 1529 and then split the account, do a rollover, rename the beneficiary to the second beneficiary, and then start distributing there. Or just use one account for your full needs, if that's what you really want to do.

I will say, I actually used different accounts for each kid because it was just psychologically easier for me. So I could bucket them out. Yeah. And then you don't have to pick and choose who you love more and which name goes in the account. By the way, Bill, is that two live crew on your phone right there?

I tried to mute my phone during the call because I noticed I got a notification. And yeah, it started wrapping at me. So that's New York for you. I have a follow-up for you. So on AnimalSpirits this week, we were looking at college tuition. John Throat up here. And over the past 10 years, college tuition has actually lagged the overall inflation rate.

It really flipped recently. But that's surprising to a lot of people who have seen college prices go up and up and up. And it's finally starting to roll over a bit. So Michael, my co-host on the show, said, wait a minute. What if I'm actually saving too much in my 529 plans for my boys?

Is that a problem? And I said, well, as Bill Sweet would say, you can eventually convert them to Roth IRAs if you don't spend it all. Correct? Yep. Correct. Up to $35,000 per beneficiary. Correct. With this FanDuel account, does he really even need a 529? I think he's doing pretty well.

They don't have a Roth IRA option for FanDuel. But I did want to sneak in. Most 529 planned accounts are per contribution, but some are per beneficiary. And so, Ben, that would be one reason in the state of Georgia, at $2,000 per beneficiary, you get a higher tax deduction if you do that on a, like I said, per beneficiary basis.

Taxpayers, Maine, Ohio, Oklahoma, Virginia, Wisconsin, among others, would potentially benefit from having multiple 529s if they have multiple kids. Okay. All right. I have one follow-up for you on the tax stuff. This mortgage is going to come out. But what's the biggest two or three big points of the new tax legislation that passed last night that will make sense for people?

Yeah. For individual taxpayers, to be honest, Ben, not a lot, particularly if your income exceeds, let's say, $50,000 or $100,000, because most of the individual changes had to do with refundable child tax credits. So if you have a child and you're slightly lower income, you get a higher tax refund, potentially.

Most of the changes on the business side had to do with bonus depreciation and R&D credits. And they're relatively wonky. It's not a headline, in my view. But the headline for me is that why is Congress mucking with the tax code retroactively to 2023 in the month of February?

That would mean to be the question of potential dysfunction. People are filing tax returns right now. So I guess just as a policy question, why are we doing this a year after the fact? It is crazy. There's no line in the sand on this stuff, that you can go backwards.

Yeah. Well, Congress makes the laws around here. Are tax professionals like you supposed to plan ahead if you're changing the rules after the fact? I mean, that's the thing. And they continue to cut IRS funding, frankly. And that might be a political priority for some. But what it means for the rest of us is it's more difficult to file a tax return.

You're right, Ben. If you filed a tax return already, there might be some additional refunds that you won't be touching for six to eight weeks because Congress is mucking with the tax code very, very late in the year. So we'll see how this all lands out. It's going to be the Senate, and then it needs to get signed by the president to law.

But yeah, this is a moving target. And you get it live here in NASA Compound. Also, on the topic of taxes for our new people here and young people here, I find a lot of people don't understand that you can still be contributing to an IRA for 2023 this far into 2024.

I just topped off my SEP IRA for 2023 this month. That's great. Not to brag, Ben Carlson. Retroactively, yes. Yeah, but yeah, April 15th is the IRA contribution limit for tax year 2023. And you're right, Duncan. Wow, we got so much more time. But that means if you put a 2023 contribution in now, you get 2023 stock market returns too.

Not quite. Unfortunately, yeah. Time machine, we're still working on that. Can I get a ruling on you guys? Non-alcoholic beer during the day. Is that a no, or how does that land for you guys? I love it. I'm just curious. I walked by the NA section in the store this morning, and it's getting bigger and bigger.

That's a good question. Yeah, I don't know. What does it say about me? That's what I'm curious about for you guys. I mean, you're going to get judged because people will think it's real. Yeah, it's kind of edgy. I love on the edge. Yeah, I like it. We're changing the tax code this week, guys.

I'm living on the edge. All right. Yeah, sure. Have at it. I approve. I don't know. All right. Thanks to Bill Sweet, as always, for being our resident tax expert. It's good to see you in New York this week, Ben. It was fun. I was in New York for a couple days.

Got to help these guys liven in person. New Compound & Friends tomorrow. Remember, email us at AskTheCompoundShow@gmail.com. Thanks for all the people in the live chat, as always. And leave us a comment or question in YouTube. Like, subscribe, all that good stuff. And we will see you next time.

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