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Wednesday, April 6, 2011

A Roth IRA for my Daughter

Ahhhh. A poignant moment. Miss Em earned about $1100.00 last year, so I urged her to start a Roth IRA. Of course, I had to help her through the complexities, which were exacerbated by computer glitches and other stuff. So a 15 minute on-line process ended up taking a lot of time.

Miss Em doesn't quite understand WHY I am so insistent on her Roth. I said, "In 40 years, when Mr. FS and I are gone, you will see this account and be happy you did it."

In case you are wondering, she got Vanguard STAR, a balanced fund, which is the only one with a $1000.00 minimum. We are putting it under our family account umbrella, so she is exempt from the low balance fee.

My college-age children earn very little money. They chose fully-paid-for scholarships, so we are happy to provide spending money and support summer programs. Both also volunteer in the summer. Their scholarships allow them the luxury of participating in service activities.

But when they earn some money, it goes into the IRA. Now our family has funded its Roths for 2010 and Mr. FS and I have funded for 2011. You have till April 18 to fund your 2010 Roth. JUST DO IT.

If you are lower-income, you may be eligible for a Saver's Tax Credit.

Do you love the Roth IRA as I do?


Misplaced Coupon said...

I funded a roth for myself when I was 14 or so. The balance isn't terrible impressive at my age of 26, but it made terrible gains in a TIAA-CREF fund for a quite a while. I think we chose that company because they allowed minors with their custodians to start a fund. Kudos to your daughter though! Vanguard is a great place to keep an IRA (where mine is now).

E.C. said...

I do love the Roth, and I'll miss it very much when I start graduate school and have no "earned income" to contribute. I guess I need to formulate some other plan for investing part of my $30,000 fellowship stipend, but I'm not sure where to start.

Anonymous said...

Tell Miss Em it's because maintaining a habit is much easier than starting a habit! When I went back to school and no longer had a retirement account through my employer, I started a Roth. Even if I can only put in $5 or $10 a month on my stipend (much lower than E.C.'s because she is in science, probably has VIGRE grants and so forth), it still keeps me in the habit of thinking of retirement savings as a line item I need to take care of.

Duchesse said...

Living in Canada of course we don't have them, but we have similar registered retirement savings plans. The gov't has done a very effective job of subway ads showing how much $1K invested at 20 earns. One son is most impressed- an "ant", and has enrolled the other is more of the "grasshopper" school of thought.

Good for Miss Em!

Funny about Money said...

Good move!

My son took the money in the Roth I'd started for him to use as the down payment for the house we copurchased. You're allowed to take it out without penalty if you're using it to buy your first dwelling.

Unfortunately, our guess that the real estate market was bottoming out was a FAIL, and so he lost every penny of that, to say nothing of tens of thousands of his mother's money that went down the plumbing.

Tell her to leave the money in the IRA until she's ready to dodder off to the nursing home! ;-)

Shelley said...

I'd love them more if it was OK to put in any money, not just 'earned' money, as I don't have earned income anymore. Bummer.

Suzy said...

I was thinking a few days ago that I needed to get back to contributing to my Roth - hard to decide between upping my 401k or doing the Roth - I'm not too savvy on the advantages - I know the 401k I don't pay taxes on til later and it lowers my current tax bill but roth is ready to take out in 5 yrs or hold til retirement without taxes.


Frugal Scholar said...

@mc--Not sure if it's TIAA's fault or the general market during those years. Very impressive to start so young.

@EC--It's good to have a fellowship rather than earned happy.

@6e...--i'll tell her. She doesn't read the blog or the comments. Thanks for the good advice and I will pass it on.

@Duchesse--Hmmm. Twins with same parents and different attitudes. Nature or nurture???

@funny--Oh that house! Not all investments work out, alas.Things may change.

Frugal Scholar said...

@Shelley==It does seem unfair, in a way. Still, you're lucky to have been able to retire so young.

@Suzy--I like the Roth b/c of the flexibility for w/drawals.

Donna said...

Just finished funding mine for 2010. I do have some retirement savings from my newspapering years and will also get a small pension in addition to Social Security.
But I want that Roth. I definitely want it and will fund it faithfully each year -- as a freelancer, I need to watch out for myself.

Frugal Scholar said...

@Donna--Congratulations on funding for 2010!