[Certified Financial Group]

Helping your grandchildren avoid student debt is a worthwhile endeavor, but it’s not the only way you can safeguard their financial future.

Read the rest of the story.

[Villageswimmer]

Thanks...I read the article and can't find an advantage of funding a Roth as opposed to a 529. Did I miss it? We've been funding 529s, but are willing yo change our strategy if there's a good reason.

[pqrstar]

Originally Posted by Certified Financial Group

Helping your grandchildren avoid student debt is a worthwhile endeavor, but it’s not the only way you can safeguard their financial future.

Read the rest of the story.

Yes, but they have to have earned income up to the amount funded.

and they can't withdraw without penalty until they are 59 1/2.

[Villageswimmer]

Originally Posted by pqrstar

Yes, but they have to have earned income up to the amount funded.

and they can't withdraw without penalty until they are 59 1/2.

Right. After my post, I did a little research. There really doesn't seem to be any good reason to use Roth as a college saving vehicle . In fact, the Vanguard site implies that it's not a good idea at all.

OTOH, if you want to save for grandkids' retirement, it's appropriate...and what lucky grandkids.

[Fraugoofy]

Not true. U can withdraw the original amount without penalty for first time educational expenses. You can't withdraw any earnings...

[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.

[Villageswimmer]

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.

[rjm1cc]

The ROTH is a very good vehicle to save for retirement for individuals that have a limited income and thus pay little if any income taxes. After 5 years the contributions can be withdrawn (not earnings) so this could double as an emergency fund or you can withdraw the funds for qualified college expenses. If you are putting less that 5,500 into a 529 plan and the child has earned income I would consider the ROTH. BUT the child owns the ROTH money and can do what they want. You can also not transfer the ROTH to another child.

[Hal :-)]

Originally Posted by naneiben

This is an interesting idea.....

Wow, this gets complicated. You can see I have more questions than answers. I love the idea of the dollar a day savings plan.

It does get complicated. But my situation is simple. I'm not contributing anything. I don't have earned income so I can't contribute to a Roth. But I do annual Roth Conversions every year, at least until I take SocSec at 70. I opened new accounts for the kids and fund them at that time. Later I'll just do annual transfers.

I figure the Roth funds are all theirs in the long run anyway and this is a way get them started. Actually, it's kind of silly to go through all this effort. But I just want the opportunity to honestly say I've been contributing $1/day and suggest they continue.

I actually have their parents as the secondary beneficiaries (after spouse). They understand the plan and will carry it out if we're not here.

I also do the 529 for education. But I'm less confident in that after Obama proposed taxing it. It went nowhere, but the fact that it was even suggested is enough for second thoughts on contributing too much.