<p>I’m pretty much in the “teach them to fish” camp although, for us, this falls in the grey somewhere.</p>
<p>We’re helping our kids with their Roth IRAs while they are in college. They are on the hook to earn money for any expenses beyond tuition, room and board, and books. So they earn $2000-$3000 dollars for spending money (including side trips off their study abroad experience) … so they are basically spending virtually all the money they are earning … .and have little to no money to fund a Roth IRA while in college. So we’re funding their ROTH IRA while they are students and not in position to do it. This is a perishable opportunity to save that would not happen without our help … and also gets them support and advice from (our) advisers they will not come close to getting if they start on their own at 22, 25, or 30 on their own.</p>
<p>There is one other big situation that Mom3ToGo and I are thinking through and trying to develop a game plan. At the extreme of “teach them to fish” we leave them on their own after they graduate. It is also true that we will have pretty substantial assets when we die … and while we may not hit the US inheritance taxes we live in a state with a inheritance taxes that kick in relatively early (and possible retirement locations also have inheritance taxes.) Mom3ToGo and I live WAY below our means so, barring some major bad event, have a continuing growing asset pile. So we die at 85-90 and leave our 50 to 60 year old kids a pile of money … after having that money not help them through grad school, buy their first home, pay for the grandkid’s college, etc. While I believe in teaching them to fish <strong>TO ME</strong> having this money and not leveraging it to our kids advantage just seems stupid.</p>
<p>Mom3ToGo and I haven’t figured out our path through this yet but are looking at how we promote “teaching them to fish” but also utilizing strategic interventions to use the family money to help their lives. Funding the IRA while they are working students is one such example.</p>
<p>(PS - Mom3ToGo is more frugal then I and more of a “teach them to fish” and more of a “do it on my own” person than even me. At the extreme she would inherit money from her parents at 55, never use it, grow the pile on her own, teach the kids to be self suficent, pass a bigger pile on them when they are 50-60, have them never use it, have them pass on a bigger pile to their kids when they are 50-60, have them never use it, etc. Lots of self-sufficency in this story … but not a lot of leverage of the money the family has saved … there must be a better path than this).</p>
<p>“Busdriver11, you know the old saying about what doesn’t kill you makes you stronger? I’m a very tough old woman. ; ) I left out about half of the story when it started sounding like a bad soap opera”</p>
<p>Yes, I’ve heard that so many times from my dad, I think as a way of explaining that really, all those dangerous situations they put us into as kids were actually good for us. Hey, I like to rationalize the mistakes I made with my kids too, and hope they don’t remember them, telling awful Mom stories to their friends. I would be curious to hear the other half of your story, it’s amazing that there’s more and you’re still standing!</p>
<p>“I don’t know…after paying for college, isn’t that enough? Where does it end?..We do a lot for our kids, but I think I would draw the line at funding their retirement. There are enough entitled kids nowadays, not sure this is a good idea”</p>
<p>I’m pretty darn sick of paying for college myself. It seems to be never ending. But it sounds bad when it is phrased as, “funding their retirement.” It sounds better when you think of it as passing on more of their inheritance tax free. Or helping them initially fund a retirement while the great deal of the Roth still exists. Plenty of people don’t think twice about helping pay for a wedding, home down payment, car, grad school, or grandparents starting an account or paying for school. Helping them ensure their financial future in the long run, with a tax free once in a lifetime deal, seems sensible to me, as long as you aren’t hurting your own finances to do so. A few years from now, the Roth could be gone.</p>
<p>Our kids are out on their own now and paying their own bills - except their phones. We keep paying their phone bills so they never have to think twice about calling their old parents! We started a conversation with them about the importance of saving and funding for retirement, and my daughter with a worried look on her face asked me if she’d done the right thing setting up a Vangard acct or if she should be saving sew here else. And that ended that conversation. That’s it in a nutshell, really. How we treat our kids is a reaction to our kids, their personalities and needs.</p>
<p>(brag alert!)My son earned a full tuition, academic merit scholarship which he is rightfully proud of. He also works to pay for his living expenses (beyond the room and board that we cover.) That’s part of why we’re thinking about doing this. He’s a hard-working, level-headed person but he’s not looking at careers that pay off until way down the line, if ever. I do love me some compound interest, so it seems like getting him started on it, until such a time as he can take over the savings himself, is a reasonable step. </p>
<p>Maybe it is fishing for him, instead of teaching him to fish but we don’t see it that way. Instead, we see it as training wheels until such a time that he can pedal on his own (am I mixing up my metaphors?) Plus, we’re doing this for him but we’re also doing it for us in that it’s one less thing to worry about. He’s our only child…at some point it’s just going to be him (& hopefully a lovely husband by that point.) This seems like a way to somehow cushion the blow of being “alone.” </p>
<p>I do like some of the ideas offered here and will certainly think about other options as well. I do appreciate the input. Thank you.</p>
<p>3togo…I would be worried about health care costs as we get older more so than starting our kids retirement funds. I do understand what you are saying, but life sure does bring surprises along the way.</p>
<p>It’s kind of funny, I have no problem paying my kids college tuition, but it just wouldn’t “feel” right for me to just give them even a $2,000 Roth while they are in college or just out. Maybe I have to think this through more…but on the surface, funding a Roth to me is giving money away and I don’t think it would teach my kids a good lesson. Once they have a job, then teach them to open an IRA and put away what you can.</p>
<p>I’m a little suprised at how many people view this negatively. Maybe it is the title of the thread? Nobody is really suggesting funding their kids’ entire retirements. And I don’t think anyone is suggesting that anyone “ought” to be helping their kids open or begin to fund an IRA or a Roth.</p>
<p>It is just a nice thing to do if you can afford it and if you are so inclined. If you are honestly worried that your kid would use the Roth to buy drugs, then of course you wouldn’t help fund one.</p>
<p>Sheesh, I don’t think helping with a few thousand dollars in an IRA will ruin my kids’ abilities to fish for themselves throughout their lives. Sort of akin to thinking that by our paying for their college education they won’t appreciate it or be motivated to do well (that whole skin in the game thing). Nothing wrong with a kid having skin in the game, but not every kid NEEDS to have a loan hanging over his head to be motivated.</p>
<p>Okay - I’ll put it a different way (at the expense of maybe causing some friction among some) - I think it’s plain weird and IMO a little sad that parents would still be handing significant money to their 50 y/o ‘kids’ (I’m not talking about a $25 gift card or something). I know that some parents do this as do probably most of you. Now ratchet that down to their 40 y/o ‘kids’, 30 y/o ‘kids’, and just started in their careers 20 something old ‘kids’. I feel the same for all of these points of time in life.</p>
<p>I would NOT have wanted my parents to hand me money at any of these points. I truly feel that it’d not only potentially deprive me of a part of my independence, at least intellectually and in perception, but actually be an insult to my abilities. I realize that the parent may think they’re just being nice because after all, they have more money than the kid at that point in their relative lives, but there’s a subtle overtone there of the parent still parenting the kid in the financial support space. </p>
<p>IMO there s/b a delineation point and I think this should generally be at the time they start their careers or before. Retirement, by definition, is for when their careers are over and is tied to and s/b a part of their careers, and it’s something they should handle themselves and for most of our kids, it’s something they ‘can’ handle themselves and something they can own and be proud of.</p>
<p>I used the word ‘generally’ purposely since obviously not all people are in the same situation and some will have challenges making them more dependent than others.</p>
I felt this way to some degree when I was younger, but that’s mostly because the money came with strings attached, as in “here’s some money to buy new carpets because yours look worn out”. The control aspect annoyed me - I felt perfectly capable of deciding when to buy new carpet and where it fell in the priority of spending, and didn’t appreciate someone telling me my carpets were dingy.</p>
<p>Now I realize it is just a pre-inheritance and it doesn’t bug me. Plus, we’ve trained them not to tell us what to do with the money. :D</p>
<p>Great thread, and perfect timing…like so many things on CC… D is just starting her first job and we have told her we want her to start a Roth IRA, but hadn’t figured out the details. After reading through these, I think what we may do is contribute to her IRA an amount to match what she contributes ( up to allowable amounts)…as if we were the employer matching funds. Once she heads off to college, if college expenses are high, we will shift our payments toward those, but if she finds a way and makes choices that keep college expenses lower, we may be able to continue that through her college years.
I think we have all seen the charts and advice to start contributing in your teens…advice that most of us probably saw in our 40s and wished we could tell our younger selves. I am glad our kids will have a chance to benefit from this information when it will really help!</p>
<p>I certainly felt this way when I was younger.</p>
<p>This is a bit over-simplistic but when we redid our estate planning we were told we could …</p>
<p>1) “Teach the kids” and leave them on their own (… and we want them to be fine on their own) … leave them a pretty big pile of money when they are 50-60 years old … and also give at least our state a pretty big chunk of our money (and possibly Uncle Sam also by the time we die)</p>
<p>2) Transfer some of assets in advance so we minimize state and federal taxes and keep as much of the money in the family as possible.</p>
<p>A couple final comments. In Mass inheritance taxes kick in at $1M which given the value of homes near Boston means most “upper middle class” families will hit the state tax if not the federal limit … so this is not just an issue for the very rich. Second, while our lawyers and financial guys started us on this path mostly concerned with avoiding taxes talking about implementing it brought us into discussing “teaching them to fish” while also transferring some assets before taxes take it and while it can help out kids lives.</p>
<p>I’m all for passing on money while the kids can use it. We have always been extremely grateful for my in-laws’ generosity, gifts given with no strings attached. I hope to be able to help our grandkids in the same way. I had my kids open Roth IRAs as soon as they had earned income. I didn’t fund it, but I would have if it had been necessary. Oldest D is on her own and in charge of her finances, but I do remind her every year to fund her IRA. </p>
<p>(GladGradDad, you may think estate planning by giving money to adult children is weird and sad, but the freedom it has given us has been a wonderful gift!) No subtle overtones of still parenting, just old folks extremely interested in tax avoidance. Our state has fairly high inheritance taxes also.</p>
<p>“I would NOT have wanted my parents to hand me money at any of these points. I truly feel that it’d not only potentially deprive me of a part of my independence but actually be an insult to my abilities.”</p>
<p>So what about when they die? Would you have wanted them to leave it to the state, or give it to someone else? Would it have offended your sensibilities if they passed it on to you then?</p>
<p>I think this just happens to be the issue at which you draw the line. Other people may draw the line at paying for college for their kids, giving them a car to drive, giving them a loan, paying for health insurance. I don’t think my parents would have done me a disservice if they had paid for college (beyond the first quarter of community college), or paid dorm fees for me to live away from school, or provided me a car that wasn’t an ancient deathtrap. Had they started funding an IRA for me when I couldn’t afford it for a few years, and convinced me that I needed to keep funding it every year that I could, I certainly would have appreciated that. I was so grateful when we were in a dark time in our lives, and they gave us a 2K gift. The gift, actually, wasn’t because they thought we needed it, but because my sister asked for help to buy a new stove, and they wanted to be fair. That money was so appreciated.</p>
<p>When me and my husband were laid off, with a baby and a toddler and no job in sight, it would have been a blessing not to despair that we would never have any savings again. I have been pretty poor, and there is nothing noble or life affirming about it. Skimping on you and your kids doctors visits, eating less healthy food…yeah, I’m happy to help start my kids off on the wealthier track, even though, knowing their personalities, they’ll do just fine. Why would I want to give it to the government instead?</p>
<p>There is a difference between funding their retirement accounts for them in their 20s and making some monetary gifts starting when they are a bit older with no strings attached (and no expectation that they will receive a gift every year). You can still do estate planning and make gifts when they are older, but I still think that making kids responsible for themselves as adults in all ways in their 20s is a gift in itself. I choose not to provide “training wheels” to a 23 year old. There are exceptions – a serious illness, for example, could lead me to step in to provide financial and other support. But for the healthy, educated (on my dime) 20-something, the lesson I want them to learn in those years is that they need to find a way to support themselves now and in the future. Learning to live somewhat below their means and saving their own money is an invaluable lesson in my mind. And pushing them toward life choices that mean they can support themselves long term regardless of what happens to me, any partner they have, etc. gives me far more peace of mind than some money I placed in a Roth for them would.</p>
<p>In NJ estate tax begins at 675K. This includes real estate, retirement, life insurance and everything you own including cars.
We finance the Roth for the kids because it is best tax break available in you early years.
S1’s income now exceeds the Roth limits. So I am very happy that we funded the Roth when he couldn’t from his earned income.</p>
<p>father91: Do you mean he makes too much to contribute to a Roth? If so, did you know that he can contribute to a traditional non deductible IRA and immediately convert that to a Roth? Assuming he has no other IRA’s. And if he does, he can still do it, but part of it will be taxable.</p>