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<p>There’s always gold, silver and platinum.</p>
<p>Older s paid into his stock/retirement/savings account when he interned at one if the big oil and gas companies. I think also at one of the big energy companies the next summer, but cant recall. I know for sure he did at the O&G because he is finally moving that money out to another investment/brokerage service.</p>
<p>Younger s interned at smaller places. Cannot recall if he had the opportunity to put anything into their savings, but it would have been a pittance. </p>
<p>I had my s’s work for me handling my technology needs when they were in town. Much more cost effective than hiring someone else. And yes, I “paid” them a small amount and converted it immediately into a Roth. They appreciated that we were starting their retirement account for them. It is an excellent opportunity that we were happy we were able to provide as a starting point for some of their retirement savings. It was a definite win-win. My computer and web work was handled and it helped to make them conscious of long term savings and planning. I don’t give a rat’s patoot if some young posters here disagree. Sounds like sour grapes to me.</p>
<p>My reasoning for contributing to my kid’s Roth IRA. When they were younger than 21, they were earning spending money that would otherwise came out of my own pocket. The money was small compare to what we earned therefore it’s not a hardship. We’re already maxed out on our own retirement fund. I think I gave them the gift of time. Who knows in 30 years it could worth something.</p>
<p>Glad GradDad: it’s not necessarily the case that parents are giving their kids money to make up for Roth contributions. As I noted, kids can withdraw their contributions penalty- free, and it’s a way to shelter a student’s earned income from the college. And if the student can save some of the money, it translates into a huge benefit later in life. For each decade that you hold funds in an IRA, you have a shot at doubling those savings. My D had earned income in middle school, and it went straight into an IRA.</p>
<p>Are students’ retirement accounts protected? I can’t remember whether or not I had to enter that info at the beginning of the year on my FAFSA. I know the parents’ are, but I don’t know about a dependent student’s.</p>
<p>Also – as far as the effect that starting a Roth has on kids’ attitudes toward money – my D is a spendthrift by temperament, but after we made a spreadsheet showing her how her money would grow over time, she is determined not to touch her savings unless absolutely necessary, and she wants to save as much as possible for retirement at a young age, because she understands that by doing so she will ultimately need to save less.</p>
<p>I think the savings in a student’s Roth are not counted for financial aid, but putting current income into a Roth does not prevent the income from being counted for FA.</p>
<p>My son made about 11-12K from an internship last summer, will do the same this summer, so he contributed 5K to his Roth last year and will do it again. He will be paying low/no federal taxes on an income that low, so since he probably will be in a high tax bracket for most of his career, it seems like a no brainer to max it out now. He doesn’t need the money, he’s not a spender, so how much he makes is irrelevant to him. But if he did need the money for some sort of expenses, college, living, we would contribute for him in a heartbeat. For this kid at least, it’s not about any sort of “lesson”. It is about an amazing investment that you didn’t have to pay taxes on in the first place, and will accrue without paying taxes on it, ever. He didn’t take much convincing, he saw the benefits of it pretty quick.</p>
<p>That said, whoever tries to change the tax laws on this one to make it taxable after you already paid taxes on it (we jumped through hoops this year and will next year too for a Roth conversion), will never get elected again, and probably sued. So I don’t think that will happen. It’s one thing to change policy so people can no longer participate, another thing to entice people to pay the taxes upfront and then say they have to pay them again.</p>
<p>One thing I did talk him into, is investing in an inflation protected fund. It is up 4.5% in the 2 months that he has been in it, even with the market crashing. It is probably the best investment advice I’ve ever given (we have really bad luck with stocks and market timing), so I’m surprised he even listened to me!</p>
<p>I think this is a difficult situation. If you’re loan-free, you’re definitely in a better spot! But if you have to take out student loans, the question has to be asked: Are you better off paying on loans (or paying instead of loans) or are you better by saving for retirement? </p>
<p>In my specific situation, the question is: start a retirement fund or pay more on student loans? I work full-time and will be starting my Masters in September. I am trying to look at the numbers and would like to establish a retirement fund, but I have to see if I’ll have the money to do so yet…</p>
<p>‘hops_scout’ - You really need to run the numbers to see which works out best for you at this point. It’s likely paying off the school loans would be a better investment at this point since you’re likely paying more interest on those loans than appreciation you’d make on your retirement fund. As an example, if you’re paying 5% on the loans but only getting 2% on you’re investments then you’ll be running a 3% deficit by having the loans (I simplified the math here). If you’re working for an employer with company matching funds though, you might want to think about saving enough to get that ‘free money’ form the company.</p>
<p>What I was saying is that there’s a time and place for everything and while saving for retirement is indeed an investment and a smart thing to do at some point, so is using funds for education and even as a down payment for a house. It’s not necessary to start saving for retirement at age 5 or 15 or IMO before getting the ‘grown up job’ and other priorities are more important. Of course if the parent is willing to fund it then, well, great, the kid gets free money, but it’s not like they’re doing their own prioritization and budgeting.</p>
<p>Both of my kids contributed to their 401Ks in order to at least get the maximum company contribution (usually around 6%) but they also had other priorities such as saving money to be able to support themselves during grad school and one saved like crazy to be able to buy a house in an expensive housing location. Meanwhile, the kids have plenty of time for the 401K to build before retirement roughly 40 years from now. </p>
<p>They’ll do better than I did in that respect because there wasn’t such a thing as a 401K when I was at that point and the idea of a pension is a thing of the past (unless you’re a government employee).</p>
<p>It’s true that if she put half of her $5/wk allowance (or whatever it was) she got as a kid into a retirement account it’d grow over time and she’d have it 50 years later for retirement but truly she was better off saving it and then using some of it for some of her own fun things, which I think has some value in being able to see the fruits of their labors, and eventually use savings from jobs for self support in grad school and buying a house, which is also rewarding, a good use of the money, and an investment.</p>
<p>Neither of my kids had any issues with saving money and both are very thrifty and plan ahead in this area as do I.</p>
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<p>You’re right and I’m trying to do just that. I’ve played around in Excel quite a bit trying to have an idea of what money I have available. I was able to save about $6k in the last year, but next week that money will be gone. I’m going out and buying a vehicle and paying for it in cash. I’m buying a 10-year old truck instead of taking out a loan for a newer one. </p>
<p>I may have enough money to start saving for much later, but I have to evaluate student loans and grad school tuition payment first…</p>
<p>^^ The important point is that you’re thinking about this which gives you an edge over a lot of people. You’ve got priorities now with basic transportation, your education, etc. and once you enter your career it sounds like there’s no question you’ll start working on your retirement investments right away and given that you’ll likely keep that going for 40 years or so, you should be fine (as long as you live within your means, don’t over-leverage, etc.).</p>
<p>As a government employee I have to deposit into my state’s public employee retirement system. It’s not like I’m missing the approximately $16 a pay period that is taken out of my paycheck.</p>
<p>Some of those programs stink and you may be essentially throwing your money away to fees.</p>