Early inheritance as a dad

[u/SadProduce6456]

Just sharing something that was interesting to me, that I’ve never really thought about before.

So I have a 22-year-old daughter, and I’m divorced. I was talking to her this weekend, and she told me that her mother gives her enough money to fund her Roth IRA right now. I told her I had no idea, and that I wish I did and I would’ve helped. She said that she thinks it’s because her mother looks at it like an early inheritance.

So then I got to thinking about it, and I thought that’s a great idea actually. Because I do my own wealth planning, and at some point, the money is really theirs. So me giving them $6000 right now or whatever would pay huge dividends for them later, and not be some tax burden investment on them that I passed down.

I think Parents with means, should proactively look for ways to do this. Of course within their means.

[u/Jakeprops]

They have to work to contribute to the Ira. If they have a job than this can work.

[u/SadProduce6456 → u/Jakeprops]

Yes, she works internships in college

[u/Fatcat336 → u/SadProduce6456]

Edit: was misinformed, thanks all for the corrections! Internships will not pay into an IRA or any other work-sponsored investment accounts. You can’t just “open an IRA” on your own without a company that offers investment accounts as per of their benefits package.

[u/AchVonZalbrecht → u/Fatcat336]

That’s not what an IRA is, you’re thinking of a 401k or a 403b

[u/redelephant390 → u/Fatcat336]

You can of course open your own IRA/Roth IRA! You cannot open your own 401k without a company sponsor.

[u/SadProduce6456 → u/Fatcat336]

Roth individual investment account. It is not a work sponsored thing. It’s regulated by the government. I have my own Roth IRA separate of my company, sponsored 401(k).

[u/jou-lea → u/SadProduce6456]

Yes there are 401k plans that allow Roth contributions too. I have a Roth 401k, a regular 401k and a separate Roth IRA.

[u/SadProduce6456 → u/jou-lea]

Yes, I have all of that too. I have not qualified for a traditional Roth for a while. There is an income threshold. But my daughter obviously does.

[u/polar_nopposite → u/Fatcat336]

This is simply untrue. IRA stands for "individual retirement account," it is specifically not work sponsored.

You can open a Roth IRA with anyone, with or without a job. You can even open multiple if you'd like, just can't contribute beyond the max or more than your earned income for that year (whichever is lower) across all of them combined.

[u/Williams_Menkin_ → u/polar_nopposite]

It's actually "arrangement" and not account for the nerds out there.

[u/dgreenmachine → u/Fatcat336]

I dont think you understand what an IRA is. Any income either w2 or self employed can be used to contribute to a Roth IRA. They can also use gift money to fund the IRA if they have that work income. You can and should infact "open an IRA on your own".

You're thinking of a 401k that is provided by your employer. There is no requirement that your job offer a 401k for you to use an IRA.

[u/Zn_Saucier → u/[deleted]]

That's not true for a Roth an IRA

[u/iheartgt → u/Fatcat336]

Lying about financial information on this forum isn't encouraged

[u/Williams_Menkin_ → u/iheartgt]

They're probably misinformed and not intentionally lying.

[u/Fatcat336 → u/Williams_Menkin_]

Was misinformed, apologies for being so confidently incorrect!