UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Author: MotleyGeo One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 72  
Subject: Funding my kids IRA Date: 8/15/2005 5:57 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi all -

Let's say I like my kids and want to be nice to them (they are teenagers, so this is sometimes a challenge). Both work and earn a couple thousand a year. I was thinking of funding an IRA for them.

What do you think about putting money in an IRA for a 17 or 18 year old? Yes, I realize they could pull the cash out the next day, pay the tax and frolic with the money, but when I think about money compounding for 50 years I go nuts!

Your thoughts?

George
Print the post Back To Top
Author: Scooby456 Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29 of 72
Subject: Re: Funding my kids IRA Date: 8/15/2005 7:39 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
As someone who´s father encouraged him to start an IRA at the age of 16 I think it´s a great idea and a good way to get your kids to start thinking about retirement planning, something that is probably furthest from their minds right now.

Instead of fully funding their IRA´s, one recommnedation would be to mimmick a co-funded retirement scheme, whereby you ´match´ their contributions 1:1, 10:1, 25:1. This way they will be contributing some of their own funds towards retirement and will become ´vested´ in the process. Hopefully they will derive the same thrill from compounding that you do.

Preston

Print the post Back To Top
Author: MotleyGeo One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30 of 72
Subject: Re: Funding my kids IRA Date: 8/16/2005 10:25 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Preston - I like the matching idea. I use to do that when they were very young and we are talking pennies, nickles and quarters. I got away from it over the years. Good idea. It helps develop the investment habit.

I currently kick back their earnings from savings and two stock dividends with cash-in-the-palm. I don't actually pull the money from the account, it comes from my pocket but it gives them periodic feedback that the money just isn't going into a black hole. Its pretty cool when they starting asking, "shouldn't I be getting another check soon"?

thanks,

George

Print the post Back To Top
Author: SDTrond Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31 of 72
Subject: Re: Funding my kids IRA Date: 8/17/2005 2:59 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Put it into a Roth IRA. That way it compounds tax-free in the worst case that they do pull it out at some point.

Which -- if they use it for home purchase or education, is not AS bad as using it for cars/trips/consumption. <grin>

Regards,
Trond

Print the post Back To Top
Author: Mark12547 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32 of 72
Subject: Re: Funding my kids IRA Date: 8/17/2005 11:06 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Put it into a Roth IRA. That way it compounds tax-free in the worst case that they do pull it out at some point.

While the regular contributions can be pulled out at any time without tax or penalty, certain rules have to be followed to be able to pull out the earnings without tax or penalty.

Which -- if they use it for home purchase ...

There are certain rules about pulling out money for a "first time home purchase" (if one were not yet 59.5 years old and had a Roth IRA for at least 5 years), but that exempts the earnings from penalty, but one would pay income taxes on the earnings.


Print the post Back To Top
Author: MotleyGeo One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33 of 72
Subject: Re: Funding my kids IRA Date: 8/17/2005 11:27 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Actually I like the idea of a penalty. I want the investment to grow. Sure a house is usually a good investment, but if they want to save for a home they can always move back home (I enjoy my daughters...even in this teenage stage...go figure!) and bank the money.

When my wife and I got married we moved into my parents basement for a year. With two nice incomes, no rent and no kids we packed it away. Our first house was modest and with a large down payment we were able base our monthly payment on just my income. Her income was play money and play we did for 6 years before our first kid. We were able to have fun, stay out of debt and save money. After 25 years of marriage we are still following the same formula and have been blessed beyond my hopes. Despite this I still worry about retirement. I don't want my girls to have this worry.

George

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Advertisement