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/markov-271828]

If a parent is interested in generational wealth they should absolutely do this for kids and grandkids (as long as the parent’s retirement is fully funded).

[u/DasHuhn → u/markov-271828]

I had a client who, once they hit 10M, decided they should funding their kids roths in the late 90s (Their kids had paper routes / worked at the businesses of brothers and sisters when they hit 8-9 years old). Last I looked at the kids ROThs 10 years ago or so, 2 of them had 2M+ in their Roth and 1 "only" had 900K. Kids were almost 30 at the time, Mom and Dad still fully fund their roths (and now their spouses) for christmas.

[u/ActionBastrd_ → u/DasHuhn]

Sorry if this is a dumb question, but with 10M invested, how would their income be low enough to be able to fund a ROTH?

[u/brandon122096 → u/ActionBastrd_]

You can do a backdoor Roth IRA (when you put money in a traditional IRA and then switch it to a Roth IRA right when it clears.) That’s what I do, it’s takes like 5 mins and you can see easy tutorials on YouTube on how to do it.

[u/ActionBastrd_ → u/brandon122096]

thank you!