Thinking about starting a RothIRA for two of my kids. (D2 does not need it.) I know we can contribute as parents. We will not contribute the maximum and both make more than we would contribute.
Any ideas?
We’ve started doing so in the past year. Opened Roth IRAs for the kids for an xmas gift. I’d rather give them that (and we are fortunate to be able to do so) than a lot of other stuff. Will fund a small amount per year to get them started in these early years (assuming they have income that year). I hope it helps instill good savings and investment skills and that they learn the benefits of compounding.
Great idea! One of my kids has had an IRA since he was a toddler. The other two didn’t have W-2 income until age 15 so they had to wait.
I’d do it with the understanding that you are getting them started and showing them how. But to me, the main point is teaching them early to save. If you do it without their knowledge as I’ve known some parents to do, then the child isn’t learning much. You want to get them started on something they will continue when they can.
I think it’s a great idea.
In addition, make sure that they contribute to their own 401k’s. I have mentioned on cc before that we cover D’s medical insurance (very cheap on my plan) and cell phone bills with the agreement that she puts the money she saves into her 401k at work. She balked a little at first, but 2 years later she sees how much her money has grown and refers to her company’s match as free money. It’s a great habit to intsill in your kids.
We started them for our 20-somethings this past year, and once a year put another bit of money in it (neither one of them has disposable income at this point, it’s all housing/food/gas/insurance). Their jobs do not offer matching nor any sort of retirement plan for them at this point. It’s not a signficant amount of money by any means – we started with $1K in each one – but it’s hilarious how excited they are. They both downloaded apps to watch the stock markets and the mutual funds their IRA is investing in. We are lucky to be able to do this.
My kids have had them for many years. It’s through usaa, which their banking accounts are as well so they see it whenever they want. We’ve talked for years about financial planning with them - from student loans to budgeting to saving both for emergencies and retirement. We’ve talked through our intentions for the money for them - ie - I don’t want them at 22 cashing it out to go on vacation and why. You need to save so much for retirement and with compounding interest there is really nothing like time.
I think the roth ira is a good idea. I would look into custodians with low fees and low cost funds and good reputations, and no “full service” brokers, imo.
Please excuse the programming as I pause for a public service announcement - As to kids with no money to spare - everyone who works should practice savings, even if it is only $10 per week, also imo. Almost everyone spends small amounts on something that they could save instead - eg. purchased lunch, coffee, dinner or drinks out, clothing etc. My step D and her husband always complained that they had no money when living on a small salary and could barely afford the basics - I could have found literally hundreds per month that they could have saved on ahem “essentials” just from a very casual glance at the stuff they had in their condo.
We did it- had the kids work in the business and then converted their pay to their Roth.
Any suggestions on custodians anothermom2?
Both of the kids, in their twenties, have savings and little or no debt. They have been taught financial responsibility, I hope! S contributes to a retirement account at work that is a matching. But his pay stinks. ( College educated physics/math major from an elite LA. A long story revealed on other threads) D2 is currently a temp but has just been told that they plan to make her permanent in a few weeks. It will involve some kind of profit sharing /retirement. She’ ll learn more when she becomes permenant.
I just would like to supplement their retirement while we are able and still working. Any suggestions for specific ones? Probably would only like to invest $1000 or less initially.
Vanguard or Fidelity would be my suggestions. Good places for one stop investment shopping needs as the kids’ portfolios and investment acumen grow - hopefully. Vanguard has a $1k minimum. I believe Fidelity is higher at $2k.
I contributed to kid #1 Roth IRA for 2014 max limit, kiddo contributed to her SEP IRA. The other kid had some earnings but I’m not worried about that one. She will be earning lots of money this summer and soon after that. But it’s up to her to contribute or not to Roth or 401k or even keep it as reserve money.
To those of you contributing for some children and not others, no guilt about equality/fairness?
Not at all. There are times that I spent more on one kid vs the other. I just want to make sure kid #1 get going because she tends to get too busy to start or set up her retirement plan and she is not getting any younger.
Just an FYI, Fidelity doesn’t allow retirement acounts for minors but Vanguard does.