Many of my clients have asked about making gifts to their children or grandchildren as many are now graduating from college and beginning new lives. Graduates will soon be showered with gift cards and cash, but before giving cash or buying the latest Apple accessory, consider another lasting gift: Seed a child’s retirement and future by making a contribution to a Roth IRA, that can be opened in the name of the graduate.
This of course begs the question, why be concerned with retirement now: It’s just simple math. The money invested earns interest and is compounded over many years. These accounts will grow tax free for life, and no required minimum distributions have to occur at any time.
In addition, there are many excellent reasons to help your young graduate with a Roth IRA:
Roth contributions can be withdrawn at any time without penalty so a Roth IRA can be a great emergency fund in addition to a great retirement vehicle.
Roth IRA funds can be used for college expenses, penalty free, so that when they have children, these funds can be available to pay for college expenses.
Also, and a great benefit of this gift, is that $10,000 in investment earnings can be withdrawn tax, and penalty free for a first-time home purchase.
Cash and gift cards can be rapidly spent on emotional purchases that have no lasting value; why not consider a gift that has a legacy that “gifts” for a lifetime.
Be Educated! Be Proactive!