OT: Roth IRA's

[JayDogSmooth]

Thanks everyone for the advice on the Colonoscopy, now debating what to do with a Roth IRA. My daughter just turned 1 and we have an account w/TD Ameritrade for her, just a regular brokerage account in my wife and mine's name. I don't want to put it in her name b/c as of age 18 she'd have access to it legally, and I know at 18 I was more interested in hitting on chicks, fist-pumping and smoking drugs rather than saving money.

The debate is if I change it to a Roth for her and put it in her name, legally she'd have access to it at age 18. My wife and I both have Roth's, so we can't put it in our separate names. We could always hide it and not tell her, and if she's doing the right thing in life at age 30 give her access to it, but I'm not sure with all of the new technology advancing the way it is that she wouldn't somehow find out about it.

On the plus side it'd be tax free so which is awesome, I'm just fearful that if something goes array and it's in her name, we wouldn't be able to stop her from accessing it and potentially pissing away all the $$$ - at the same time, I don't want her to pay heavy capital gains taxes either. Anyone have advice with this? I know we can do the whole 529 college plan, but I want to have control over the $$$ if she doesn't go, etc. - thanks!

 

[RUsojo]

This thread again?

 

[mktman]

sometimes personal decisions should be personal. Sounds like this is a call you should make on your own and not on the advice of football message board lunatics.

 

[RUDutch]

Doesn't she need earnings to start a Roth? Not likely a 1 year old is working.

 

[slyker]

Thanks everyone for the advice on the Colonoscopy, now debating what to do with a Roth IRA. My daughter just turned 1 and we have an account w/TD Ameritrade for her, just a regular brokerage account in my wife and mine's name. I don't want to put it in her name b/c as of age 18 she'd have access to it legally, and I know at 18 I was more interested in hitting on chicks, fist-pumping and smoking drugs rather than saving money.

The debate is if I change it to a Roth for her and put it in her name, legally she'd have access to it at age 18. My wife and I both have Roth's, so we can't put it in our separate names. We could always hide it and not tell her, and if she's doing the right thing in life at age 30 give her access to it, but I'm not sure with all of the new technology advancing the way it is that she wouldn't somehow find out about it.

On the plus side it'd be tax free so which is awesome, I'm just fearful that if something goes array and it's in her name, we wouldn't be able to stop her from accessing it and potentially pissing away all the $$$ - at the same time, I don't want her to pay heavy capital gains taxes either. Anyone have advice with this? I know we can do the whole 529 college plan, but I want to have control over the $$$ if she doesn't go, etc. - thanks!

Check out the tax free Coverdale Education Savings Account. (Formerly known as Education IRA). You control the assets even when they turn 18 and It is much more flexible than 529 plans. I have money for my kids in both 529's and ESA's. Wish there was a higher limit on ESA's as I find it to have lower fees and as I said, much more flexibility. Can move m oney around within the ESA fund just like a normal IRA. 529 plans limit you to two transfers per year within the funds. Coverdale ESA's have a limit as to how much you can contribute per child per year (I think 2K) but if you do it from the day they are born, it can grow tax free and cover a good chunk of their education. I have my kids ESA's with Vanguard. Lots of fund choices.

 

[Crazed_RU]

Doesn't she need earnings to start a Roth? Not likely a 1 year old is working.

I agree. I'm almost certain you need earned income for a retirement account. If the OP is saving for college I suggest not using a Roth IRA - that would be step 1.

 

[kjb32812]

The advice you seek will be delivered to you by a unicorn.

 

[MADHAT1]

I agree. I'm almost certain you need earned income for a retirement account. If the OP is saving for college I suggest not using a Roth IRA - that would be step 1.

Unless Hyman Roth is running the IRA, then DogSmooth doesn't need to worry about earned income for a retirement account,all JayDog needs to do is what Hyman wants and he might be able to see his daughter enter college.
If not having a Colonoscopy will be the least of JayDogSmooth's worries.

 

[JayDogSmooth]

I realize it has to be earned income, but I would take all the money that my daughter gets from Birthday, Valentines Day, Halloween, Thanksgiving, Christmas and New Years presents and contribute that towards the Roth. Would those kinds of monetary gifts count as earned income?

 

[rutgersal]

OP, I think you need a financial planner. concur that is incorrect to use a roth ira for the stated purpose.

 

[FlintTown]

Thanks everyone for the advice on the Colonoscopy, now debating what to do with a Roth IRA. My daughter just turned 1 and we have an account w/TD Ameritrade for her, just a regular brokerage account in my wife and mine's name. I don't want to put it in her name b/c as of age 18 she'd have access to it legally, and I know at 18 I was more interested in hitting on chicks, fist-pumping and smoking drugs rather than saving money.

The debate is if I change it to a Roth for her and put it in her name, legally she'd have access to it at age 18. My wife and I both have Roth's, so we can't put it in our separate names. We could always hide it and not tell her, and if she's doing the right thing in life at age 30 give her access to it, but I'm not sure with all of the new technology advancing the way it is that she wouldn't somehow find out about it.

On the plus side it'd be tax free so which is awesome, I'm just fearful that if something goes array and it's in her name, we wouldn't be able to stop her from accessing it and potentially pissing away all the $$$ - at the same time, I don't want her to pay heavy capital gains taxes either. Anyone have advice with this? I know we can do the whole 529 college plan, but I want to have control over the $$$ if she doesn't go, etc. - thanks!

Go with the 529 plan. List yourself as the owner and your daughter as the beneficiary so you'll have complete control over it, plus having it under your name will help her cause when it comes to filling out the FAFSA. If she doesn't pursue higher education you can often change the beneficiary. Find out out all the details by going to the New Jersey 529 website.

The Roth IRA is also a great idea. That should be your next priority. Make sure she realizes she'll get hammered in taxes and penalties if she takes withdrawals before 59 1/2. Set up an account with Vanguard. Diversify with index funds and show her how to rebalance every year. That should be the only time she ever looks at it.

 

[RUDutch]

I realize it has to be earned income, but I would take all the money that my daughter gets from Birthday, Valentines Day, Halloween, Thanksgiving, Christmas and New Years presents and contribute that towards the Roth. Would those kinds of monetary gifts count as earned income?

Nope, those are gifts.

 

[Catwink03]

I'll further echo what others have said, you can't open a Roth for your child. You need earned income via w2 or similar, basically you have to be paying payroll taxes on it.

Your best choices are a 529 or utma account, just be mindful of the kiddie tax rules.

 

[RUDutch]

FIFY "basically you have to be paying payroll or self-employment taxes on it."

 

[Goo]

I'll further echo what others have said, you can't open a Roth for your child. You need earned income via w2 or similar, basically you have to be paying payroll taxes on it.

Your best choices are a 529 or utma account, just be mindful of the kiddie tax rules.

True in the case of a minor. A non-working spouse is allowed to make IRA contributions within income guidelines. Not that this is relevant to the OP question. But, let's clarify for others concerned...

 

[FlintTown]

True in the case of a minor. A non-working spouse is allowed to make IRA contributions within income guidelines. Not that this is relevant to the OP question. But, let's clarify for others concerned...

Unless the laws have changed recently, you can fund a minor's Roth IRA up to $5500 or 100% of their earned income, whichever is less. So if your daughter made 2K working last summer, you can invest 2K by April 15 for the year 2015.

 

[SkilletHead2]

JayDog, you don't need financial advice, you need parenting advice. So here it is: Trust yourself. You are going to do a great job as parents and your 18 year-old will be a responsible girl you are proud of.

 

[mikebal9]

As I stated in a previous thread, I opened a Roth IRA in my name to save for my son's college education, if that's the route he chooses. You can't open it in your child's name, but you can obviously open one in your name and then use it for whatever you want later.

 

[RUnTeX]

JayDog, you don't need financial advice, you need parenting advice. So here it is: Trust yourself. You are going to do a great job as parents and your 18 year-old will be a responsible girl you are proud of.

I was going to say more or less this, but not as nicely. OP and spouse need to take responsibility for the daughter they raise and if they're already concerned at age 1 that their future 18 y.o. will blow the money, they should look in the mirror and figure out what type of parents they are planning to be for the next 17 years.

 

[Saint Puppy]

I was going to say more or less this, but not as nicely. OP and spouse need to take responsibility for the daughter they raise and if they're already concerned at age 1 that their future 18 y.o. will blow the money, they should look in the mirror and figure out what type of parents they are planning to be for the next 17 years.

I think this is a little harsh - yes of course parenting plays a huge role in how your children will turn out. But if you think being great parents automatically equals having kids who are teenagers/early 20's making rational decisions with a windfall of money then I think you will be unpleasantly surprised at the numbers who don't. Not saying I agree with all of the OP's concerns but disagree if you think that your earlier parenting will totally influence the decision making process of a teenager.

 

[robcac26]

It may not always be the kid you need to worry about. My father put all the money I received from Confirmation gifts into some sort of account and then made his own contribution of a few thousand, and it turns out my mother spent it all. My parents also bought a car under my name to start building my credit, but my mother then screwed up the payments so my credit was hurt before I even knew what credit was.

However, they did buy a bunch of savings bonds for me in my first few years and I didn't even know about that until my mother gave them to me a couple years ago because they will be maturing soon. I'm sure the earnings and taxes are more lucrative for a Roth IRA than savings bonds, but it sounds like you might not be able to go that route anyway since you already have one, and if you are concerned about your daughter spending the money, maybe that would be a better option for you because you can physically hide them from her.

 

[beaced]

It may not always be the kid you need to worry about. My father put all the money I received from Confirmation gifts into some sort of account and then made his own contribution of a few thousand, and it turns out my mother spent it all. My parents also bought a car under my name to start building my credit, but my mother then screwed up the payments so my credit was hurt before I even knew what credit was.

However, they did buy a bunch of savings bonds for me in my first few years and I didn't even know about that until my mother gave them to me a couple years ago because they will be maturing soon. I'm sure the earnings and taxes are more lucrative for a Roth IRA than savings bonds, but it sounds like you might not be able to go that route anyway since you already have one, and if you are concerned about your daughter spending the money, maybe that would be a better option for you because you can physically hide them from her.

Can one divorce a Mother?

 

[RUJohnny99]

I realize it has to be earned income, but I would take all the money that my daughter gets from Birthday, Valentines Day, Halloween, Thanksgiving, Christmas and New Years presents and contribute that towards the Roth. Would those kinds of monetary gifts count as earned income?