Retirement account for adult children
I want to set up accounts, 401k or Roth IRA, not sure what kind, for my daughter and son with some of the money from the sale of my house. I remember that you recommended some places because they had no fees and were rated well. I don’t want them to be able to withdraw any of the money until they at least turn 55. Suggestions?
Terry Says
Well, that’s a very generous idea. But first, you can’t create a retirement account unless they have earned income form a job. And their ability to contribute to a Roth IRA might also depend on whether they are covered by a retirement plan at work. So this good and generous idea is not something you can just dump on them. they’d have to be involved in the planning, and you could open the IRA at Fidelity or Vanguard, both nearly no-cost places to invest.
On the other hand, if you have grandchildren you definitely could set up a 529 college savings program for them that could grow tax free and ONLY be used for college expenses! That might even be a better idea. Search my columns for 529 plans, or get the new edition of The Savage Truth on Money on Amazon to learn more. Or go to www.SavingforColleg.com.
In Illinois teh 529 plan is at www.BrightStartSavings.com.
If no grandchildren, there may be other ways to fund a gift — and keep the money out of their hands for a while. You could buy a combo life/long term care insurance policy (which we all hope we won’t need to use) and make them beneficiaries of the life insurance portion. That way you will have money for care if needed, and won’t be a burden on them. But if not needed for your care they will get the death benefit.
Search my columns as I recently wrote an updated one on combo life/LTC policies.
