14-yo Daughter - Roth IRA (1 Viewer)

[gianmarco]

Personally, I think having a balance between the two concepts is important. Retirement saving is huge and there is definitely a financial benefit, but saving for short term goals is also a life skill. 

I'd try to find a way to do some in the Roth and a portion for a larger purchase a short time away (a car). Both are important.

 

[Johnny Rock]

My parents used to double whatever portion of my allowance I opted to save and put it in an UGMA account.  By the time I was in college there was a pretty decent amount even if it was only 10-20 dollars at a time. I am convinced this is what set my mindset in regards to spending money responsibly and ultimately led to my career in finance. 

I am doing the same with my 5 year-olds right now, although am having a hard time convincing them that saving is more important than Pokemon cards.

As far as the OP is concerned, it's definitely a good time for her to start a Roth since her tax bracket is 0%, but in my experience people do not leave enough of a safety net in non-qualified accounts and are forced to raid their retirement accounts when things get tight.  I would encourage her to save in other places besides putting 100% into a retirement account.

Agreed. It won't be 100%. She suggested 50% but I think it should be higher. 

$1,500 is only the current earnings. She started this when she was 13. Once she gets a regular pt job that amount will jump. 

 

[gameday]

I'm surprised at the negative comments in this thread.  Don't understand that at all.  

My older son starts college next month and has probably saved every dime he's ever made.  He is an active investor and has surprised me with how much he's learned about the market.  

The deal I made with him is that I would match any active income he made and I would put that in a Roth IRA for him.  His Roth totals over $12K and his stock account is over $15K.  At this rate he'll have at least $60K when he graduates in 4 years.

He's totally gets compounded growth and, in fact, just this past week we talked about how powerful that is.  

I will make the same deal with my younger son when he starts working next summer.

 

[Johnny Rock]

it would be cool to have a few individual stocks too, such as an Apple, or a Biotech/Nano/NextGen stock. Which "Forever" stock or two would you recommend for a young person with a long horizon?

Bump. 

Ethereum? Cryptocurrency Index? Rare metals? GOOGL? Solar? Bio?

 

[belljr]

I'm surprised at the negative comments in this thread.  Don't understand that at all.  

My older son starts college next month and has probably saved every dime he's ever made.  He is an active investor and has surprised me with how much he's learned about the market.  

The deal I made with him is that I would match any active income he made and I would put that in a Roth IRA for him.  His Roth totals over $12K and his stock account is over $15K.  At this rate he'll have at least $60K when he graduates in 4 years.

He's totally gets compounded growth and, in fact, just this past week we talked about how powerful that is.  

I will make the same deal with my younger son when he starts working next summer.

My daddy always said you can't take it with you

 

[Dentist]

Personally, I would encourage her to save money for her first car and then college....before retirement. 

You know as much as I'm obsessed with retirement savings,  I also agree that I'd rather see a young student build up a fund of money that they can use for vehicle,  a fund for money to use while in college,  a fund that might help buy some initial furniture for an apartment someday, etc.

I'd far rather see a UGMA style account or even a cash account..  and I'd use TD ameritrade and buy some commission free Vanguard or ishares ETFs

I think it's awesome to get some investing experience, but I just wouldn't use the Roth route

 

[Fat Nick]

Maxing out the Roth is a great idea but not sure if that advice really applies to a 14 year old that is working 2 days/month.  Once a young person starts working part-time in HS (over 12 hours/week for example), I could get behind the idea of a Roth.  In this case, I would put that small amount of money that she is earning each year towards car and college savings.  

I guess my point is that, as a parent,even if you let the kid actually have the money they make, if you can afford to do it, put as much into a Roth for them as soon as they have the W2 income to support the contribution (even if it's 100% of what they made). 

Totally get it being unreasonable to ask a kid to put all her earnings in a Roth - but you can help her out so much by doing it for her once she's got recognized income.

 

[Fat Nick]

Bump. 

Ethereum? Cryptocurrency Index? Rare metals? GOOGL? Solar? Bio?

For the lazy man, buy some index funds, or ETF's like the SPDR or QQQ and let it ride.  If she wants to play, stick with the more reputable companies.  Don't speculate in a ROTH.  Slow and steady are the way to go.  One bad decision on a busted .com can set you back years.

I had a bunch of Amazon stock in ~2007 that I just sold in ~2015.  I wish I still had it.  That was my big gainer, and I just wanted to cash into my profits.

 

[Steve Tasker]

I guess my point is that, as a parent,even if you let the kid actually have the money they make, if you can afford to do it, put as much into a Roth for them as soon as they have the W2 income to support the contribution (even if it's 100% of what they made). 

Totally get it being unreasonable to ask a kid to put all her earnings in a Roth - but you can help her out so much by doing it for her once she's got recognized income.

Yes, this is the shark move.  Just fund it for her to the extent of her earnings, if you can afford to, and let her keep the earnings for a car or whatever.

 

[KCitons]

You know as much as I'm obsessed with retirement savings,  I also agree that I'd rather see a young student build up a fund of money that they can use for vehicle,  a fund for money to use while in college,  a fund that might help buy some initial furniture for an apartment someday, etc.

I'd far rather see a UGMA style account or even a cash account..  and I'd use TD ameritrade and buy some commission free Vanguard or ishares ETFs

I think it's awesome to get some investing experience, but I just wouldn't use the Roth route

Why not a Roth. She can always take the principal out? Its impossible to make up missed years of a Roth. At worse, she ends up withdrawing all the principle (Which puts her at the same place she would have been with regular savings) At best case, she finds she doesn't need to touch any of the money and has a jump start on retirement savings. 

 

[Dentist]

Why not a Roth. She can always take the principal out? Its impossible to make up missed years of a Roth. At worse, she ends up withdrawing all the principle (Which puts her at the same place she would have been with regular savings) At best case, she finds she doesn't need to touch any of the money and has a jump start on retirement savings. 

because i don't like the idea of pulling the principal and messing up your tax basis and all that..  it's complicated.

I'm a huge fan of the Roth.. a huge fan of retirement savings.. and i just wouldn't do it.    Regular cash account is good enough...  she's not putting enough in there to really be losing out much on the tax savings down the line.

 

[RokNRole]

Imagine if your parents put aside some of your money when you were younger.  Things may have been a little easier for you right now. 

What money?

 

[Johnny Rock]

because i don't like the idea of pulling the principal and messing up your tax basis and all that..  it's complicated.

I'm a huge fan of the Roth.. a huge fan of retirement savings.. and i just wouldn't do it.    Regular cash account is good enough...  she's not putting enough in there to really be losing out much on the tax savings down the line.

I couldn't be more surprised by your posts Dentist. You're advocating a taxable account over a Roth IRA?

I already told my kids if they get all A's in school they can have a car. 

 

[Dentist]

I couldn't be more surprised by your posts Dentist. You're advocating a taxable account over a Roth IRA?

I already told my kids if they get all A's in school they can have a car. 

yeah, i am.   There's a lot of things having a surplus of cash can do for someone in their high teens to mid-20's can do.. like not having to put furniture on credit, or having enough money to get a full 20 percent down on a home,  or to pay for a car with cash...   just a ton of things that would be higher EV than retirement income.

You aren't really going to pay much taxes when it comes time to harvest the money because when you do you'll be in a low tax bracket.

My parents didn't start a Roth for me,  they paid for my education instead.. and that was way better.    I started a Roth IRA at 24.

I stand by my logic.  18-25 year olds need accessible cash lest they be tempted to knock on Credit's door and then things have the potential to spiral out of control.

 

[Binky The Doormat]

What a joke of a thread.

" hey how can I manage my child's money without them noticing"?

Get a damn clue




1

I see it didn't take long for RnR's trolling to stay within his own thread.   

 

[=Smackdown=]

I'm surprised at the negative comments in this thread.  Don't understand that at all.  

My older son starts college next month and has probably saved every dime he's ever made.  He is an active investor and has surprised me with how much he's learned about the market.  

The deal I made with him is that I would match any active income he made and I would put that in a Roth IRA for him.  His Roth totals over $12K and his stock account is over $15K.  At this rate he'll have at least $60K when he graduates in 4 years.

He's totally gets compounded growth and, in fact, just this past week we talked about how powerful that is.  

I will make the same deal with my younger son when he starts working next summer.

Wish my Dad introduced me to the market when I was 13.

 

[KCitons]

Wish my Dad introduced me to the market when I was 13.

I wish someone introduced my Dad to the market when I was 13. 

 

[Dentist]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

 

[KCitons]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

You're a glass half empty kinda guy aren't you.

 

[NutterButter]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

i'd reconsider paying for their college.  it could give them the wrong message.

 

[wilked]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  

That sound you heard was an IRS Agent cracking his knuckles 

 

[Mrs. Rannous]

Vanguard and buy Vanguard funds.

Oh, yeah.  They are excellent.

Don't buy individual stocks unless you have the time to really learn about each company and also trading and such.  Just go with a balanced, no-load mutual fund.

 

[Mrs. Rannous]

Not sure what information you found, but the things you listed all seem wrong. There are minimums on Vanguard funds, no biggie. Help her out. I've never had an account fee. I use an app all the time. The last couple trades I made were on the app. Plenty of data, just search the ticker. You won't find commission free anywhere to my knowledge. Whenever you buy a Vanguard fund, it costs nothing. Trading fees are $7 when you switch to an account you can trade in.

What he said.  I just sold stock today.  You can just log in and do that stuff online.  Their phone support is good stuff.

 

[siffoin]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

I'd ask your CPA...but yes I would do something like this in a heartbeat if you can.  When they turn some working age...have them take out the trash in your office for $80/hour...but funnel $ to them whatever the max limit is...maybe look up setting up a trust for them.  You can have a trustee for their  trust so they don't blow the $.

 

[Mrs. Rannous]

Whatever you do, stay away from Wells Fargo.  Their brokerage and trade people are just awful.

 

[Dentist]

You're a glass half empty kinda guy aren't you.

1/2 sounds pretty good, i'm running about 1/8th today

 

[Dentist]

i'd reconsider paying for their college.  it could give them the wrong message.

I'm among the cheapest millionaires you'll find, but if there's one thing I'm doing for sure, it's paying for their schooling.   Best thing I ever received from my dad, I'm paying it forward.

 

[Johnny Rock]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

Why do you think your kids will appreciate you fully funding college but not appreciating a head start on retirement? Seems if they're so inclined, they will waste the 529 on crack whores during college instead of later in life. Also, my kid isn't being handed a Roth IRA.

Also, who's to say they will want to go to college? I've aways been a staunch go-to-college guy. But the compounding cost of college just doesn't seem like it has the return it once did. I've advocated for my kids to start a business, possibly instead of college. 

 

[Dentist]

Why do you think your kids will appreciate you fully funding college but not appreciating a head start on retirement? Seems if they're so inclined, they will waste the 529 on crack whores during college instead of later in life. Also, my kid isn't being handed a Roth IRA.

Also, who's to say they will want to go to college? I've aways been a staunch go-to-college guy. But the compounding cost of college just doesn't seem like it has the return it once did. I've advocated for my kids to start a business, possibly instead of college. 

You have a good point there.  I do think the cost of college has appreciated to the point where it's not as +EV as it used to be.

There are so many posts on the dental forums from younger guys:  "I'm 400k in debt,  was this worth it?"   and I cringe at the idea of it having cost that much.

So you may have the winning idea.

But I think in your 20's you'd appreciate having no college debt if you went to college rather than a funded retirement account

 

[Mrs. Rannous]

But I think in your 20's you'd appreciate having no college debt if you went to college rather than a funded retirement account

Those two things aren't mutually exclusive.

 

[Ned]

The fact that Roths are tax-free on qualified withdraw basically means that, while you pay taxes on the initial contribution, you don't pay on the withdraw or the appreciation in the account. 

I'm sure you know this, but you owe 10% if you withdraw appreciation before age 59.5 or before the account ages 5 years. 

 

[msudaisy26]

Quick question here. Last year we put some of our daughters money in a CD. She is only 4, but figured it would be nice to help her buy a car or house when she got older. Would that money be better served in a Roth IRA?

 

[pecorino]

The poster who said to fund your daughter's Roth with your own money and let her keep what she makes--that sounds right. Keep in mind that the IRS will want to see a 1099 form so be careful about funding the right amount. And sure, let her pick one stock for a small portion. It'll keep her interested. I've been trying to get my 2-year old some work to open her Roth but so far no one will hire her yet.

 

[Tom Hagen]

Quick question here. Last year we put some of our daughters money in a CD. She is only 4, but figured it would be nice to help her buy a car or house when she got older. Would that money be better served in a Roth IRA?

Your daughter would need to have earned income to fund a Roth IRA so it's unlikely that is an option. 

 

[NutterButter]

I'm sure you know this, but you owe 10% if you withdraw appreciation before age 59.5 or before the account ages 5 years. 

You can withdraw for education without paying the 10%, but you have to pay tax on the earnings so in essence, it acts like a 529 on steriods.   

 

[Doctor Detroit]

Maxing out the Roth is a great idea but not sure if that advice really applies to a 14 year old that is working 2 days/month.  .  

Sure it does.  A Roth IRA is a glorified and protected savings account, where you can withdrawal the principal whenever you like.  It's a perfect vehicle for everyone, regardless of age or income.  

 

[Doctor Detroit]

Whatever you do, stay away from Wells Fargo.  Their brokerage and trade people are just awful.

This can't be said enough based on the recent news of Wells fleecing their customers at will.  Not sure why anyone stuck with them, pretty much every credit union out there is better than Wells and you can choose any discount brokerage for investments. 

 

[Sand]

because i don't like the idea of pulling the principal and messing up your tax basis and all that..  it's complicated.

I'm a huge fan of the Roth.. a huge fan of retirement savings.. and i just wouldn't do it.    Regular cash account is good enough...  she's not putting enough in there to really be losing out much on the tax savings down the line.

Excel is a wonderful thing.  Memorializing contributions just isn't that big a deal.  Fact is that at these ages these kids get essentially tax free money in and tax free money out.  You can't beat tax free forever - after the amount of time we're talking here that move is worth at least 50% over taxable.  Not necessary to stick it all in there, but nothing wrong with putting a decent chunk in there.

I'm helping my kid transfer his UTMA over to a Roth now that he has a bit of income.  It will pay off for him later in life bigly.

 

[KCitons]

This can't be said enough based on the recent news of Wells fleecing their customers at will.  Not sure why anyone stuck with them, pretty much every credit union out there is better than Wells and you can choose any discount brokerage for investments. 

I'm still with them. 

I'm grandfathered in with 100 free trades a year.

 

[Fat Nick]

I'm sure you know this, but you owe 10% if you withdraw appreciation before age 59.5 or before the account ages 5 years. 

Yeah - missed the word "qualified" (i.e. older than 59.5) in my statement.

 

[gameday]

I have a 3 y.o. and a 2 y.o.    What do you think about the idea of hiring them both as "models" for my practice and using their images on the company website..  "here's Dr. Dentist working on cute children!"  It could enhance the pediatric image for my office.

Then I pay each of them $5500 a year for the perpetual rights to their images.

Then I use that money to fund them a Roth IRA from now until they are 18.  It could be worth well over 100K at that point.

Then they MAY be either a) tempted to withdraw the principle and blow it on crack whores that are into boston pancakes   or b) not feel compelled to save their own money for retirement because they've got such a fat Roth IRA at such a young age

Now do you think they'd appreciate that.... or just taking the same $5500 and jamming it into their 529 and covering their education and letting them fund their own damn retirement?      I'm voting for the latter...

Well, I hope I don't end up regretting this but I'm nearing retirement (23 months to go) and that is fully funded.  Likewise, my kid's college costs are fully funded.  My older son begins college in a month and has worked in a corp IT department the past 2 years (while in school) earning 16/hour.  He has saved every penny and is doing a great job self directing his stock account.

Since he and his brother will inherit everything I struck a deal with each of them that I'll fund their Roths as long as they continue working hard and not blowing their $$.  If they start wasting their money then the deal is over.

I belong to several finance forums and I'm shocked at the number of kids that graduate college with a huge debt load, and bleak prospects.  My older son has already been admitted to the biz school where he's going so it seems he will at least come out of it with a useful degree.

If this all plays out right, when the older one graduates he'll have over $40K in his Roth and around $20K in his stock account, with zero debt.  He'll be in a good position to use that a a springboard to his post-college life, or to #### it all up.  Hopefully, I'll be around to see how it turns out.

 

[Mrs. Rannous]

Well, I hope I don't end up regretting this but I'm nearing retirement (23 months to go) and that is fully funded.  Likewise, my kid's college costs are fully funded.  My older son begins college in a month and has worked in a corp IT department the past 2 years (while in school) earning 16/hour.  He has saved every penny and is doing a great job self directing his stock account.

Since he and his brother will inherit everything I struck a deal with each of them that I'll fund their Roths as long as they continue working hard and not blowing their $$.  If they start wasting their money then the deal is over.

I belong to several finance forums and I'm shocked at the number of kids that graduate college with a huge debt load, and bleak prospects.  My older son has already been admitted to the biz school where he's going so it seems he will at least come out of it with a useful degree.

If this all plays out right, when the older one graduates he'll have over $40K in his Roth and around $20K in his stock account, with zero debt.  He'll be in a good position to use that a a springboard to his post-college life, or to #### it all up.  Hopefully, I'll be around to see how it turns out.

You've taught them money management and parenting skills.  Nothing to regret there.

 

[RokNRole]

I'd like to apologize to the OP and the entire FFA for my bahaviour in this thread.

i have a drinking problem. I was 3 sheets to the wind the other night. Got a call from family about my parents and I was in a mode of hating my parents and parents in general. I went on a nonsensical tangent in here and I'm ashamed about it.

I don't even know what a Roth IRA is