UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: steve33 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76406  
Subject: Roth IRA for a child Date: 7/20/1999 9:36 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Assuming a child has earned income and can open a Roth IRA, what are the pros and cons of having that not only as a retirement vehicle but also as college savings plan since if it is used for school expenses there is no tax penalty before 591/2.....thanx for the info in advance......Steve
Print the post Back To Top
Author: rhecker One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12411 of 76406
Subject: Re: Roth IRA for a child Date: 7/21/1999 8:11 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Assuming a child has earned income and can open a Roth IRA, what are the pros and cons of having that not only as a retirement vehicle but also as college savings plan since if it is used for school expenses there is no tax penalty before 591/2.....thanx for the info in advance......Steve

Steve,

There is no EARLY WITHDRAWL PENALTY for withdraws from a Roth IRA (for higher education expenses), but Bob78164 pointed out in post 12402, the withdraws are taxed at ordinary rates while earnings withdrawn from an Education IRA to pay for qualified educational expenses are excluded from income. You may want to consider a Roth IRA for the child's retirement in addition to an Education IRA for college. That way, you could be saving $500 a year for college plus $2000 a year for retirement (assuming the child has at least $2000 earned income). With an Education IRA, the child is not required to have any earned income.

Print the post Back To Top
Author: FoolishBull One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12440 of 76406
Subject: Re: Roth IRA for a child Date: 7/21/1999 8:40 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Assuming a child has earned income and can open a Roth IRA, what are the pros and cons of having that not only as a retirement vehicle but also as college savings plan since if it is used for school expenses there is no tax penalty before 591/2.....thanx for the info in advance......Steve

I'd check out this site.

http://www.ricedelman.com/planning/kidsncash/default.asp

In particular, see why it may not be a good idea to save $ in your child's name...

http://www.ricedelman.com/planning/kidsncash/savechild.asp

Good Luck.
F.Bull

Print the post Back To Top
Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12443 of 76406
Subject: Re: Roth IRA for a child Date: 7/21/1999 9:49 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I looked at the second URL cited by FoolishBull:

http://www.ricedelman.com/planning/kidsncash/savechild.asp

Which suggested in part, "Here's the solution: Remember that under a UGMA, the assets belong to the child, and the law requires that the assets be used for the benefit and welfare of the child. Most parents think this means the money can be used only for college expenses, but that's not so. In truth, money in a UGMA can be used for almost anything — provided "anything" is for the benefit and welfare of the child.

After all, your child needs clothes, food, shelter, education, and medical care, and there's nothing in the UGMA rules that say you can't use the child's assets to pay these expenses. For example, say you take your child to the doctor for her annual check-up and the bill is $200. Instead of paying for that yourself, withdraw $200 from the UGMA account and use that money to pay the bill. Simultaneously, send $200 of your own money into an investment (in your name) that is similar to the one used by the UGMA.

In this manner, you'll slowly erode the value of the UGMA, while building assets in a new account in your name. If you pay for all of the child's expenses through the UGMA, such as private school, camp, music lessons, clothing, even their portion of food, shelter, utilities, and insurance costs, you ought to have no problem eliminating that account well before the child is 18.


This concept makes some sense, but some of the examples seem to stretch beyond the legal limits. Parents have a legal obligation to support their children and using UGMA funds to pay for items that the parents are legally obligated for --- food, clothing, shelter, right off the top --- seems abusive to me.

This topic has been discussed elsewhere on TMF, and, as I recall, RecoveringFool and/or 2gifts had very credible thoughts on the subject.

Regards, JAFO

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement