Jim,My Son turned 19, so I thought of setting up an investment account and start investing, to create an habit. This will be an index fund, with a monthly investment of $100. It cannot be IRA because he is not earning anything.I thought SP500 is a simple choice and the $$ amount is so little, I don't want to split it.I read your article on the bankrate.com. My initial thought was to go with Vanguard, but you mentioned fidelity is zero cost. Is there any other choices I may want to look into or you suggest?
FYI:(check this since the last tax act)Any earned income at all allows $2000 to be socked away in an IRA. Best gift you can give your kid at this point is maxing out the retirement funds, they cannot foolishly touch it (at least not easily). (I'm with you on having a 19 year old with no job, also.)
Kingran, check what Rob says on the potential for having an IRA. I was not aware that any income gets you a $2,000 contribution potential, but the rules have shifted a lot. My understanding is that you can contribute only up to your earned income. But if you're looking for funds, check the Fidelity ZERO series. In particular, if you want exposure to the S&P 500, then have a look at Fidelity ZERO Large Cap Index Fund (FNILX). Here's the sneaky part: it's an S&P 500 fund without being called that, because it would cost royalties to do so, and that would hurt the cost structure of the fund. But fundamentally it's an S&P 500 fund. They don't mention this anywhere. So no transaction fee and no expense ratio. And of course inside an IRA means that mutual fund distributions will not incur tax either. That's a hard proposition to beat. Even Vanguard doesn't go that low, though it's close. Fido has a few other ZERO funds, too, for broader market exposure or international. So if S&P 500 is your objective, I think this is your best option. And if they're tracking an index, why pay anything when you can pay zero and get the same result? Hope this helps!Jim
You're right, Jim.In recent years the limit has been set at "your taxable compensation for the year, if your compensation was less than this dollar limit. [the maximum contribution limit]". https://www.irs.gov/retirement-plans/plan-participant-employ...There was a time when you could drop $2k in based on "any" earned income, but that's in the past.
Thanks.Kid is not working so far, and is not going to work during college. I don't know the internship he is looking for this summer is going to pay anything. Sometimes, I wonder whether he has a healthy disrespect for working. :(
Find a solution to that, and I'll send you mine for repair!
This too shall pass, (ancient Mesopotamia)Who's slacker 19 year olds are now 30 & 31 and have fended well for themselves....after some time of seeking. They are both content and well-adjusted after a long bout of "I don't want to be like, live like, you Dad." ...that is work, buy a house, car, family obligations etc., etc. ...and to keep this on topic...I set both up within the last year (both working) with Chas Schwab Roth accounts and started with Wisdom Tree Large Cap fund (symbol EPS) 0.08% expense ratio and let them pick a stock of their choice..one chose O, the other chose SPOT. Guess which is the accountant and which is a bartender. A quick look at the FNILX v EPS etf's shows similar YTD (+20.5%)and 1 year (+9.5%) performance. A little difference in allocation explains ~0.1-0.2% or so difference in each. FNILX is passing it's one year anniversary this month. Top locations for both are MSFT, AAPL, BRK.B, AMZN. So it looks like Jim is right -0- is better than 0.08%Joeenjoy those boys...be there to listen to them.
TBC,KingRan said nothing about his kid being a slacker. I said as much about mine. His may be a devoted student with internships and a hard courseload.Mine has a hard courseload, but doesn't appear to be handling it well!-Another Rob
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