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Subject:  Re: Starting IRAs for Children Date:  10/19/2011  7:59 PM
Author:  JAFO31 Number:  69694 of 88498

borngiantsfan: "I am thinking of starting my 18 year old children with a small IRA. They both are in college and have part time jobs earning about $3k per year. They also both have small investment accounts that we started with about $3500 each in them.

So I was thinking of starting them off with a small IRA (about $500 per year) to get their retirement planning going early."

They will need to sign the paperwork, probably, unless you have a formal Power of Attorney and can convince some financial institution to honor it.

"I am considering going with a Roth IRA mainly because:
- their income level is so low, there is no tax benefit with a Traditional IRA"

"- The Roth is tax free at withdrawal time, when they will likely have a higher tax liability"

Until 9/9/9 passes or the FairTax or any other consumption based tax.

"- Funds can be withdrawn from a Roth IRA for home purchase if needed"

I believe that up to 10k can be withdrawn from a traditional IRA without penalty for a first-time home purchase. And with respect to the Roth IRA, "funds" is imprecise. IIRC, contributions can be withdrawn without penalty, but if you are withdrawing earnings, then the usual rules apply.

"- The ROTH IRA is more flexible than a traditional IRA in many other ways."

Many? Other than no RMDs, which more of a theoretical issue for mos people, what other way?

"It seems like a way to get them going towards a retirement plan, without easy access to the money (as in the investment account) except for a home purchase. In other words they can't simply pull the money out and buy a something :)."

Well, they can pull it out easily enough if they are willing to live with the tax consequences (and and related family consequences).

Nonetheless, I generally like the idea.

Regards, JAFO
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