Quote:
Originally Posted by Hal :-)
I set up separate Roth accounts for the Grandkids (in my name but destined for them). I initially had to backfill but now contribute $365 each January ($1/day). When they begin working and have earned income, I will give them the Roth funds to contribute to their own Roth account.
This will give them a good start and motivate continued savings. Hopefully, they maintain the Roth and appreciate how just $1 a day has grown since their birth.
I'm with Schwab so I put it in SLYV (small cap value). The original idea came from Paul Merriman, Make your Kid Rich for $12/day. |
This is an interesting idea. In the article it looks like the original investment for the child was in a regular (not Roth) fund and when she reaches 19 she is to move $5500/yr to a Roth, if I read it correctly. Quite different from what it sounds like you are doing.
Having it in a Roth from day 1 is far less complicated and it's not taxable at all. However, how do you satisfy the "earned income " requirement? In your case, I guess it's [I]your[I] earned income?
You mentioned the accounts are in your name. Did you name each child as primary beneficiary of "their" account?
If the grandparent doesn't have earned income, I wonder whether they could break up an existing Roth into separate accounts destined for individual grandchildren? They wouldn't be able to contribute annually, but the funds would still grow tax free.
Or, Would it be better to open the Roth in the child's name and hope when he reaches 18, he has the good common sense grandpa has? That still leaves the pesky earned income requirement to satisfy.
Wow, this gets complicated. You can see I have more questions than answers. I love the idea of the dollar a day savings plan.