Save For Your Childrens Retirement

Most people don't think about saving for retirement for their children or grandchildren. I was pleasantly surprised that I am able to not only save for my own retirement but for the retirement of my grandchildren.

Yes, you read that right, save for your children’s retirement. Now hear me out, because I am not crazy. As a matter of fact, I wish this tool had been around when my children were small. When you think about it, it’s nice that we as parents and grandparents can contribute to our future generations in such an amazing way.

As we continue with America Saves Week, most people are thinking about saving for their own retirement, and that’s good. But why not save for your children at the same time. I am all for giving my future generations a financial leg up. When my retirement fund provider began offering it, I had to jump on it. It’s called a Kiddie Roth (ROTH IRA for kids). Now doesn’t that just beat all!.

The Kiddie IRA works much like your own IRA. It’s funded by after tax savings and the account grows tax free. Keep in mind though, there are a couple of exceptions. The Kiddie Roth is a custodial account for children under 18. It is funded and controlled by an adult, usually a parent or a grandparent. Control is transferred to the child once they become an adult.

Just like a regular IRA, the saver must have earned the income to fund the account. Just think, if your child or grandchild has a  job you can have them take part of their earnings and start the Kiddie Roth for them, then match their contribution. In my case, none of my grandchildren are old enough to work, so it is up to me and their parents to fund their account. The good thing is that the money we put in will sit there tax free until they take it out.

You can contribute up to $5000 a year but no more than the amount of your taxable income. So it is quite possible that your child (if he/she is of age to work) could fund this account with your help. Most children aren’t disciplined enough to do it themselves, so as the custodian of the IRA, you are essentially teaching them savings habits that will hopefully last a lifetime.

The Kiddie Roth gives young savers those extra critical years of compound growth. An early starter who saves the maximum Roth IRA contribution per year from the age of 15, could end up with double the retirement account balance of a worker who starts saving the maximum at 25. Basically, your child could end up with $1,000,000 at age 70 vs $500, 000 just by getting this early head start. Hey tell your children let me hold something lol.

Finally, the additional savings is important for young people. They will have fewer sources of guaranteed lifetime income in their retirement years. So when we save for our own retirement, let’s think about the next generation and set them up for financial success.

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

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on Save For Your Childrens Retirement

  1. Kweni
    March 2, 2018 at 3:57 am (5 months ago)

    More importantly, children should be taught on how to save for their retirement as well. If they knew there’s one being saved for them, they might not bother.

    Reply
    • tracie45
      March 3, 2018 at 9:44 am (5 months ago)

      Yes they should Kweni. That is exactly why I encourage and teach my grandchildren to save for different aspects of their life. Thank you for reading and commenting!

      Reply
  2. Neely Moldovan
    March 2, 2018 at 9:13 am (5 months ago)

    WE started doing this when our little one was born. We have friends and family donate to it instead of buying him gifts!

    Reply
    • tracie45
      March 3, 2018 at 9:40 am (5 months ago)

      Such a great idea Neely! I’m sure your little one will thank you! Thank you for reading and commenting!

      Reply
  3. Wendy
    March 2, 2018 at 10:58 am (5 months ago)

    This is something I had not thought about but so very important. Reading your posts sure has me thinking longer term and that’s a good thing thank you!

    Reply
    • tracie45
      March 3, 2018 at 9:39 am (5 months ago)

      I am glad you found value in this post Wendy! Thank you for reading and commenting!

      Reply
  4. Catherine Sargent
    March 2, 2018 at 4:19 pm (5 months ago)

    This is a great idea and I wish I had done something similar when my son was little. It is never to early to start saving.

    Reply
  5. Peter
    March 2, 2018 at 5:42 pm (5 months ago)

    Knowing the value of a dollar and saving for and with your child is as great for them as for us!

    Reply
    • tracie45
      March 3, 2018 at 9:34 am (5 months ago)

      Yes it is Peter. My grandchildren love when I teach them about finance and I love to teach them too. Thank you for reading and commenting!

      Reply
  6. Rosey
    March 3, 2018 at 6:08 am (5 months ago)

    My first to hear of it. What a practical and great idea. I would look into signing up too!

    Reply
    • tracie45
      March 3, 2018 at 9:31 am (5 months ago)

      I think this is a great idea for children too Rosey. Thank you for reading and commenting!

      Reply
  7. brianne
    March 3, 2018 at 6:54 am (5 months ago)

    I haven’t heard of Kiddie Roth yet. This sounds like a great tool for saving for our children for college! We started something for our children but haven’t put much aside yet and know we need to!

    Reply
    • tracie45
      March 3, 2018 at 9:29 am (5 months ago)

      When my children were small, I didn’t know about this either Brianne. I am certainly grateful to know about it now for my grandchildren. College is expensive so every little bit saved will be a big help. Thank you for reading and commenting!

      Reply
  8. Femme Frugality
    March 4, 2018 at 9:57 am (5 months ago)

    I love that you’re doing this! I’ll have to check into my own options for this–great idea!

    Reply
    • tracie45
      March 5, 2018 at 9:38 pm (4 months ago)

      If I can give my grandbabies a financial leg up that makes me happy. Thank you for reading and commenting!

      Reply

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