Retirement plans for adult children
hello!
We are a blended family with 5 children. They vary in age from 18-34 (the younger 2 are frosh and junior in college). As a Christmas gift, we would like to start a retirement account for each of them with a small amount of money $1000 per child. My husband believes in leading the horse to the river and teaching it to drink…great! I believe at least start them in a small pond and teach them to grow from there. That said, looking for your advice on the best kind of IRA to start for them. The older ones probably have something started through work, but i believe that time+money=money. So i would like them to begin to grow something early and contribute as much as they are comfortable with through time. I have very little in my retirement, so i guess i just want them to start thinking about it now. Thank you in advance for your advice
Terry Says
Oops. You forgot one thing. They can’t have an IRA or any other retirement plan — UNLESS THEY HAVE EARNED INCOME for that year! So if the younger ones were working and then spent all their money (!), you could open an IRA up to the total amount of their earnings.
And if you want to get younger kids to be interested in investing, you have to be careful how you open any other type of account — especially if they are going to apply for financial aid for college. An account in their own name, or a custodial account, which is required for a minor under age 18, will weigh VERY heavily against them in the aid formulas.
If financial aid isn’t an issue for the younger ones, then go to www.Stockpile.com as an easy way to invest a small amount of money and let them choose stocks.
As for the older ones, it’s way past time to have a discussion about whether they are indeed signed up for the company 40l(k) plan if it is offered. And if not, contact Vanguard or Fidelity for the forms to open a Roth IRA — and start them off with a gift (the max is the amount they will earn this year, up to $6,000). But you can open an account for far less, and ask them to sign up for automatic deductions up to the $6,000 limit.
It’s great that you’re trying to encourage savings. Time is far more valuable than money –as you know So it’s wise to start early!
