Wealth Ascension Blog June 2025

• Investing For Your Kids: 529 vs. UTMA
• Roth Conversions During Unemployment
• Ignore Politics If You Want to Invest

1. 529 vs. UTMA Accounts: Understanding the Differences and Benefits

When planning for a child’s financial future, 529 plans and UTMA (Uniform Transfers to Minors Act) accounts are two popular options, each with distinct advantages. A 529 plan is specifically designed for education savings. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses such as tuition, books, and room and board. Many states also offer tax deductions or credits for contributions, making it a tax-efficient way to save for college or even K–12 tuition.

UTMA accounts, by contrast, offer greater flexibility in how the funds can be used. These custodial accounts allow adults to transfer assets to a minor, who gains full control of the account at the age of majority (usually 18 or 21). The funds can be used for anything that benefits the child—not just education. However, UTMA accounts don’t offer the same tax advantages as 529 plans, and the assets may impact financial aid eligibility more significantly.

The type of account you choose is dependent on what you want to get out of investing for your child. Talk with your advisor on how these can shape your child’s financial future.

Summary:

- 529 Plans: Tax-advantaged savings for education expenses.- UTMA Accounts: Flexible use for any benefit to the child.- 529s offer better tax treatment but limited use.- UTMAs provide broader access but may affect financial aid.

2. Taking A Break From Work? Consider Roth Conversions

Taking a break from work—whether for personal development, caregiving, or a career pivot—can lower your taxable income for the year. This creates a strategic window to convert traditional IRA funds into a Roth IRA at a reduced tax cost. A Roth conversion is when you move money from a traditional retirement account (where you haven’t paid taxes but will in retirement) into a Roth account (where you pay taxes now but not later). Since Roth conversions are taxed as ordinary income, doing them during a low-income year minimizes the tax hit and allows you to shift funds into a tax-free growth environment.

Once in a Roth IRA, your investments grow tax-free, and qualified withdrawals in retirement are also tax-free. Additionally, Roth IRAs are not subject to required minimum distributions (RMDs), giving you more control over your retirement income. This flexibility and long-term tax benefit make Roth conversions a smart move during career pauses, especially if you expect to be in a higher tax bracket later.

Summary:

- Low-income years reduce the tax cost of Roth conversions.- Roth IRAs grow and distribute tax-free under qualifying conditions.- No RMDs from Roth IRAs offer greater retirement flexibility.- Ideal for those expecting higher future tax rates.

3. Don’t Let Your Politics Affect Your Investing

It’s natural to feel strongly about political outcomes, but letting those emotions influence your investment decisions can be costly. Many investors make the mistake of pulling out of the market or changing strategies based on which party is in power. However, historical data shows that markets have performed well under both Democratic and Republican administrations. The economy and corporate earnings—not political leadership—are the primary drivers of long-term market performance.

Reacting to political events can lead to missed opportunities and emotional decision-making. For example, investors who exited the market after an election they disagreed with often missed subsequent rallies. Staying invested and focusing on long-term goals is typically a more effective strategy. Diversification, discipline, and time in the market matter far more than political headlines.

Summary:

- Markets tend to perform well under both major political parties.- Emotional investing based on politics can lead to poor decisions.- Economic cycles, not elections, drive long-term returns.- Stay focused on long-term goals, not short-term political shifts.

Brett Miller, CFA, CFP®, Financial Advisors

Scott Miller, Senior VP, Investments

Any opinions are those of the author, are subject to change without notice and are not necessarily those of Raymond James. This material is being provided for information purposes only and does not purport to be a complete description of the securities, markets, or developments referred to in this material and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected, including asset allocation and diversification. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.