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| Member |
I'd like to start investing toward my daughter's retirement now, since I'm doing a better in the paycheck. She's 12 years old. I want her to be better off than what I will be. But where to go? So many companies, so many options. What has worked well for the fine folks here, long term. I was thinking Roth IRA, but I'm not sure. Thank you. | ||
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| As Extraordinary as Everyone Else  |
Yes a Roth is a great investment vehicle provided her income doesn’t exceed the threshold (which it doesn’t sound like it will be an issue). Invest in a low fee index fund and let it ride…. ------------------ Eddie Our Founding Fathers were men who understood that the right thing is not necessarily the written thing. -kkina | |||
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Member |
To contribute to an IRA, Roth or Traditional, requires that she have "earned income". W-2 or self-employment income. Tha max amount that can be contributed is the statutory max or the amount of her earned income, if lower. You could open a UGMA (Uniform Gift To Minors) account with a bank or brokerage and invest it. As to what to invest it in, you should probably consider an index fund such as the S&P 500 index. Vanguard Funds has one and the fees are low. Probably ought to consider investing it over time, say 25 percent, wait a month or two, 25 percent more, etc so that you may take advantage of any market pull backs that may occur and lower your cost basis (average down). Just my 2 cents. Place your clothes and weapons where you can find them in the dark. “If in winning a race, you lose the respect of your fellow competitors, then you have won nothing” - Paul Elvstrom "The Great Dane" 1928 - 2016 | |||
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Fighting the good fight |
Yep. IRAs are for those with provable income, which most 12 year olds won't have. Instead, you could just open a brokerage account of your own and invest that money in it (preferably in something simple like a low cost index fund). Then let it ride. She can transfer the account to her own name once you pass and she inherits the investments, and either continue to contribute more or just let what's already in there continue to gain value. Yes, this means there will be capital gains taxes to pay eventually once she cashes out some/all of the inherited investments, but she'll still be well ahead compared to you not investing anything at all. And she'll actually benefit from the step-up in cost basis on your death, basically meaning that she'd only owe capital gain taxes on the difference between the eventual sale price and the value on the date of your death, rather than the larger difference between the eventual sale price and your initial purchase price. | |||
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| Just because you can, doesn't mean you should |
An IRA or a college fund? Look at Vanguard or Fidelity (or both) for research. Both are solid low cost fund managers that have good information on where to start. ___________________________ Avoid buying ChiCom/CCP products whenever possible. | |||
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| A day late, and a dollar short  |
Bingo Rogue! ____________________________ NRA Life Member, Annual Member GOA, MGO Annual Member | |||
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| Member |
Somewhat off topic and certainly unsolicited but once my kids starting earning a paycheck I offered to year end match any contribution to a retirement account (Roth IRA). My son is scaring me because he’s doing it and looking for a big payday. Lol. The idea is to build good habit patterns. Putting money away for her is great but the reality is teaching her how important it is to do it herself is a better gift. Especially for young girls. Rare is the young woman that contributes to her own financial future. I don’t know why but they just don’t. The best lesson you can teach her is the time value of money. The charts don’t lie. Early consistent contributions make for huge dividends in the end. You want to avoid what you read on these forums. The guys starting to save for the first time in their 30’s and 40’s. Those lost decades end up being worth hundreds of thousands of dollars. You can never start too early. Rogues post is spot on as well. | |||
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Member |
That is a great idea! | |||
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| Victim of Life's Circumstances  |
Dogs of the Dow. Easy and it works. Google for a wealth of info that is easy to understand. just one link from many https://www.investopedia.com/terms/d/dogsofthedow.asp ________________________ God spelled backwards is dog | |||
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His Royal Hiney |
The best thing you can do for her are: 1) Ensure you have setting yourself up for a secure retirement. Your retirement is your responsibility; her retirement is her responsibility. 2) Live within your means. Lower your expenses. Pay off your debts other than your mortgage. Increase your savings. Be sure allocate your savings towards an emergency fund, planned expenses like new cars, and your retirement. 3) For your retirement, max out what you can on IRA and Roth IRAs at a rate that will get you to your goal. 4) For your kid, being an example of living financially sensible is one of the best things you can do for her. train her to be responsible with money such as paying herself first in the form of savings. Go on YouTube and search for FIRE or Financial Independence Retire Early. Get that mindset and share it with your daughter. That's how you'll ensure she will be better off. "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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| Bunch of savages in this town  |
^ Excellent advice. The best thing you can give your kids is financial freedom, when things start going south for you. They don’t have to pay out of pocket for your health care, final arrangements, etc. And at that point, you should have enough assets, that will get passed onto them. I’m not counting on social security when I retire, which is not to far off, but I have maximized my contributions to my retirement account since day one. Don’t count on social security being there, or even a pension plan if you have one. Pay yourself first, and make it work financially from that point. That being said, I did open two accounts in my name, each going to one of my sons. $50/month, but let compound interest do the work. Time is definitely on their side. ----------------- I apologize now... | |||
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Don't Panic |
Another idea to consider. Fund a 529 plan with your daughter as beneficiary. 12 years old means a short 6 years before college costs start becoming a big deal. IRAs don't get factored into financial aid calculations at all, of course, but also can't be used to fund college expenses. 529s are factored in, but not as 'her' assets (essentially all of which are expected by financial aid calculations to be used for college) but as parental assets (which aren't.) Definitely do not establish an ordinary account in her name at her age, if there's any chance of her both going to college and looking to apply for financial aid. As her assets, that'll be sucked into FAFSA calculations and sucked dry. As to what to invest in for the IRA-for-retirement-in-50-years thing: the simplest and best is this: SPY (S&P 500) Couldn't be simpler and there's nothing better over the long haul. for the 529 thing: a mix of SPY (or whatever equivalent the 529 plan offers. They all should have a "Large US Equities Index" fund.) and whatever they have close to cash. 6 years out as money goes in probably put most of it into the SPY-equivalent and as college gets nearer sweeten the cash-equivalent portion. Conventional (and debatable) views put bonds into the mix for income, but earning a couple percentage points over cash at the cost of being exposed to interest rate risks isn't a great tradeoff IMO. | |||
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Nosce te ipsum |
Roth - It gets complicated because she'd have to file tax returns to show income [even if it was a fake dog-walking cash business] ... She can fund her ROTH with gifted money as long as she has that same amount as earned income. Easiest is to gift her up to $15k and sock the money away via Thrivent tax-deferred or equivalent. | |||
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Member |
My niece and nephews will probably inherit a couple thousand ounces of silver (unless I need it). It's more of a preservation of wealth rather than investment but who knows how all this will play out in the coming years. Maybe look into some Junior mining stocks? | |||
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| Member |
If you expect your child to go to college, look into a 529 account. Fidelity has them. The disadvantage is that it can affect a need scholarship. If they don't go to college you can still give them the money. https://thecollegeinvestor.com...plan-guide/missouri/ | |||
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Drill Here, Drill Now |
Since the op didn't mention savings for trade school or college, education is one of the best investments a parent can make for their kids. Averages from a March '21 article on Indeed.com shows a high school graduate $712/week, associates degree $836/week, bachelor's degree $1173/week, and master's degree $1401/week. A few thoughts on education: +2 +2 Ego is the anesthesia that deadens the pain of stupidity DISCLAIMER: These are the author's own personal views and do not represent the views of the author's employer. | |||
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Member |
Once she has ‘earned income’ I’d look to Vanguard for a Roth IRA. You can get down to $1k minimum to start if one forgoes paper statements. I’d look to the ‘Total Stock Market’ index fund. If that requires $3k to start, a ‘Target Date’ fund, way out is an option. Many don’t know how or where to start, so they procrastinate. That would get her out of the starting blocks. The 529 is a good idea, for you. The benefits can vary by State, and plan. | |||
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| Member |
I'm not a financial advisor. I would suggest you open an account with a financial firm, such as Fidelity. Within the account, open a Roth IRA account. Then, research funds to invest in. Exchange Traded Funds seem to be popular. Google search "best Fidelity ETF" to get an idea of what to invest in. Look at what the long term returns have been. Also compare them to other funds' returns since the beginning of this year, when the market didn't do so well. Some of the ETFs performed very well when the market did not. | |||
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| No, not like Bill Clinton  |
Can a 12 year old be listed as the beneficiary on a Roth? | |||
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| Member |
Thank you, everybody. I appreciate the help. | |||
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