Please Help with 25 Year Old Daughter-In-Law.

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alnukem
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Please Help with 25 Year Old Daughter-In-Law.

Post by alnukem » Mon Jan 30, 2017 12:56 am

I have a 25 Year Old Daughter-In-Law with 2 Great Kids, 3 & 4 & a Bum for a Son currently doing a 10 Year Stint in the Federal Pen. She is very nice & a good Mom. We have a very good relationship & the kids just love/ crave me. I want to help her become financially more independent. She is currently working at a nursing home making $14 a hour, which equals out to about 29K a year. I am sure she qualifies for Earned Income Credits especially with the Daycare costs which I spring for & are waiting for the tax preparer's calculations.
I was thinking of telling her that if she contributes $5500 to a Roth, I would give her $200 every 2 weeks to contribute to her work's 401K until all the matching funds are done & then to a Traditional IRA. I believe she will be receptive. I think this would give her versatility.
Now this is where I get lost. It seems like it would be advantageous to open a Taxable Account that I would fund. I believe she'll fall into the "0" tax rate & be able to Tax Harvest to keep her taxable profits at bay, yet build up equity & build a emergency fund.............What is the easiest way of doing this?

Thank you for your help & please excuse any anger I may have construed to my son......... drugs maybe our downfall!

delamer
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by delamer » Mon Jan 30, 2017 1:09 am

It is generous of you to want to help.

But if I understand you correctly, you expect her to contribute $5500 a year of her own money to a Roth in order to get $5200 from you to contribute to her 401(k)? Is it realistic for her to invest $5500 when her income is only $29000?

petulant
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by petulant » Mon Jan 30, 2017 1:13 am

I was raised by a single mother with a low income. Your time would be better spent encouraging her or helping find a way for her to get a better job. Use any extra money to fund college savings for the kids, and find ways to encourage them. Making weird deals on retirement savings for a person who might otherwise be struggling to make ends meet is just not a good deal.

*3!4!/5!
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by *3!4!/5! » Mon Jan 30, 2017 1:21 am

Ditch the the tax preparer, because you need to become very familiar with various tax credits and how to optimize them, and it's best to do that playing with tax software (and reading the appropriate publications) yourself. Some strategies may be counterintuitive.

jane1
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by jane1 » Mon Jan 30, 2017 2:02 am

petulant wrote:I was raised by a single mother with a low income. Your time would be better spent encouraging her or helping find a way for her to get a better job. Use any extra money to fund college savings for the kids, and find ways to encourage them. Making weird deals on retirement savings for a person who might otherwise be struggling to make ends meet is just not a good deal.


+1
Although if the 401k match is generous, I would make sure she contributes enough to her 401k to get the match.
She is 25. I would focus on ways to improve her skills to increase her earning potential and self-sufficiency for the long-term.
Retirement goal at this stage should be secondary. Also they need to have an emergency account funded (bank/taxable, not IRA/401k).

weedf16
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by weedf16 » Mon Jan 30, 2017 2:44 am

My advice would be not to invest in her retirement, but to invest in her education. Future success in life for her is centered around earning a higher salary which requires an education or a skill. Look at ways that you can help her with tuition at a community college and/or trade school instead of contributing to a retirement account.

CFM300
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by CFM300 » Mon Jan 30, 2017 3:37 am

Yes, ideally she should contribute enough to her 401K to get the full match. Maybe you could help her do that.

But I don't see the point of making your financial assistance conditional on her contributing $5,500 to a Roth. Especially when that might not even be possible. $29K is not much income with two kids.

Regarding your son, you mentioned drugs so I'll just say... he might not be a bum, just an addict.

Best of luck.

Sophia1884
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Sophia1884 » Mon Jan 30, 2017 3:58 am

jane1 wrote:
petulant wrote:I was raised by a single mother with a low income. Your time would be better spent encouraging her or helping find a way for her to get a better job. Use any extra money to fund college savings for the kids, and find ways to encourage them. Making weird deals on retirement savings for a person who might otherwise be struggling to make ends meet is just not a good deal.


+1
Although if the 401k match is generous, I would make sure she contributes enough to her 401k to get the match.
She is 25. I would focus on ways to improve her skills to increase her earning potential and self-sufficiency for the long-term.
Retirement goal at this stage should be secondary. Also they need to have an emergency account funded (bank/taxable, not IRA/401k).


+2

Child of a single mom with two kids...amazing mom and role model. My mom's commitment to her education is how we all got through it and now everyone is in a better place. If there is anything I've learned on this site, it is to prioritize: Emergency fund, match 401K, etc. Also, kid's college savings come last....if there is a solid foundation, they can take care of themselves with guidance.

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celia
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by celia » Mon Jan 30, 2017 4:12 am

jane1 wrote:
petulant wrote:I was raised by a single mother with a low income. Your time would be better spent encouraging her or helping find a way for her to get a better job. Use any extra money to fund college savings for the kids, and find ways to encourage them. Making weird deals on retirement savings for a person who might otherwise be struggling to make ends meet is just not a good deal.

+1
Although if the 401k match is generous, I would make sure she contributes enough to her 401k to get the match.
She is 25. I would focus on ways to improve her skills to increase her earning potential and self-sufficiency for the long-term.
Retirement goal at this stage should be secondary. Also they need to have an emergency account funded (bank/taxable, not IRA/401k).

Although she needs to have an emergency fund, have you considered what might happen when your son comes home? Will that money be joint? Will it be blown? I think putting something in a Roth for her makes sense since it will be harder for her (or him) to get their hands on it. Why don't you let her manage her own money as she sees fit, while you fund her Roth, if she is agreeable, of course. If you don't want your son to even know the Roth exists, ask her to not tell him and have the statements sent to your house. Start by contributing for 2016, but you might need to watch you don't go over the annual gift limit amount, between Roth contributions and child care payments.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

Carl53
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Carl53 » Mon Jan 30, 2017 6:53 am

If she is receptive to your plan be sure to go over her taxes with her. Between EIC and the potential for the Retirement Savings Credit (Form 8880) she surely would not owe any taxes.

cherijoh
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by cherijoh » Mon Jan 30, 2017 7:09 am

alnukem wrote:I have a 25 Year Old Daughter-In-Law with 2 Great Kids, 3 & 4 & a Bum for a Son currently doing a 10 Year Stint in the Federal Pen. She is very nice & a good Mom. We have a very good relationship & the kids just love/ crave me. I want to help her become financially more independent. She is currently working at a nursing home making $14 a hour, which equals out to about 29K a year. I am sure she qualifies for Earned Income Credits especially with the Daycare costs which I spring for & are waiting for the tax preparer's calculations.
I was thinking of telling her that if she contributes $5500 to a Roth, I would give her $200 every 2 weeks to contribute to her work's 401K until all the matching funds are done & then to a Traditional IRA. I believe she will be receptive. I think this would give her versatility.
Now this is where I get lost. It seems like it would be advantageous to open a Taxable Account that I would fund. I believe she'll fall into the "0" tax rate & be able to Tax Harvest to keep her taxable profits at bay, yet build up equity & build a emergency fund.............What is the easiest way of doing this?

Thank you for your help & please excuse any anger I may have construed to my son......... drugs maybe our downfall!


Does your DIL have any career goals? Since she works in nursing home, would she want to get some credentials like a certified nursing assistant? That might get her a bump in pay where she is now and open up more opportunities elsewhere. Perhaps you could help with tuition and babysitting.

why3not
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by why3not » Mon Jan 30, 2017 7:29 am

I suggest a gift with no strings attached rather than trying to manipulate her behavior though money.

As part of the gift, you can suggest that you hope she will be able to contribute a matching amount to her 401k for her future, but then never ask again. If you don't like that, offer to pay her daycare bill for the next X weeks.

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Tamarind
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Tamarind » Mon Jan 30, 2017 7:55 am

Agreed that no strings is the better approach. One thing you can offer that is very valuable is your time as well as advice. Tell her about the tax credits that can help make it easier for her to save a little for retirement. Teach her about compounding if she will listen. Offer to watch/feed the kids often so she has time to do research on next steps. Help her identify education that might give her a boost, or jobs that might give her better hours or benefits.

If you want to give money, make it a regular gift in support of her and the kids. Bring pantry items or kids clothes. Let her know you are there for her if she has an emergency bill like a doctor's visit. Help with her daily expenses in a way that reduces her stress and fear, and she will find it easier to plan for the future. This rather than adding another source of worry - ie how you will respond if you give her money "only for investing" and she has to spend it on rent.

carolinaman
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by carolinaman » Mon Jan 30, 2017 8:35 am

As others have stated, the best way to help her would be to help her develop her skills which can lead to a better paying job and a work career. Her human capital is her greatest potential asset. Investing in that through education would be a great way to help if she is willing to put forth the effort. It likely would require you and your spouse to help her with childcare and other means but it would be worth it if she could dramatically improve her job and career prospects.

Your desire to help is noble, but you need to look at the best way to help for the long run.

Wellfleet
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Wellfleet » Mon Jan 30, 2017 8:40 am

A big, zero cost way to help would be to be there for sick days, appointments, etc., when she might be scrambling for daycare for the kids or has to stay home with them if they are too sick to go to school/daycare. Her not going to work or having to get different daycare can blow a low income person's emergency fund fast.

finite_difference
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by finite_difference » Mon Jan 30, 2017 8:45 am

1. You are an awesome grandparent.
2. Grandparents are awesome.
3. Try to see if you can help her develop further as a nurse? Nurses should have potential to definitely earn more than $14/hr, and have training opportunities. There should be a path from practical nurse -> registered nurse -> nurse practitioner.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

JW-Retired
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by JW-Retired » Mon Jan 30, 2017 9:05 am

Not an attorney, but I believe any retirement account (the Roth) is going to be considered joint property in a divorce. IMO, if you want to be 100% certain "Bum Son" can't possibly ever get to it, a couple of 529 accounts with the kids as beneficiaries and you as the "participant" controlling the account might be a better way to go.

Also, maybe a more urgent priority is to offer money and/or child care to help daughter-in-law in improving her earning potential via further education/training?
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Strayshot
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Strayshot » Mon Jan 30, 2017 9:21 am

Just to get the terminology correct, someone convicted and in jail is a "criminal" and not a "bum", so it sounds like the son mentioned in this post is a "criminal".

I think it is great you are a concerned grandparent, but agree with others that if you want to offer financial help it is better 1) done unconditionally and 2) focused on the kids. Take the kids shopping for new clothes so mom doesn't have to, or reimburse her after she takes them, or all go together. Offer to make them dinner and watch them one night a week. while she should be saving 20% of her 29k income every year and a Roth IRA is an effective place to do that (plus she is potentially in savers credit territory) my guess is that she can't. You could just gift her the $5500 every year as well.

If there is really a risk that the returning criminal could raid or utilize their savings and retirement accounts for drugs or gambling or whatever she should be pursuing a divorce now so it is a non issue.

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KlingKlang
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by KlingKlang » Mon Jan 30, 2017 9:22 am

Has your DIL given any indication whether she intends to divorce your son or remain married to him? In this situation I would be very concerned that any funds donated to your DIL and grandchildren would end up in your son's pocket as soon as he is out of prison. 529 accounts allow you to control money for your grandchildren's education, but you may also want to consult with a lawyer about trusts.

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Watty
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Watty » Mon Jan 30, 2017 9:36 am

It is very likely that she will qualify for a 50% retirement saving credit on the first $2,000 of her retirement savings so doing that to get the free $1,000 is a very good deal so helping her get that would be a lot of "bang of the buck".

If she did not do that for 2016 she can still likely get that is she makes a Roth contribution before the filing deadline.

The income numbers on this link are after a lot of subtractions and adjustments so even if her gross income is higher than that she could still qualify for it.

https://www.irs.gov/retirement-plans/pl ... ers-credit

Other than that at the age of 25 in her situation there are likely a lot of higher priories than retirement savings.

goingup
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by goingup » Mon Jan 30, 2017 9:46 am

How disappointed will you be when she drains the Roth to fix her car or pay for her kid's braces?

She will likely be fine in retirement, provided you provide for her generously in your will.

Help her with babysitting, groceries, car repairs, etc. Personally, I would feel responsible to help underwrite her living expenses given son's absence. Funding a Roth seems inconsequential to me.

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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by *3!4!/5! » Mon Jan 30, 2017 11:03 am

Watty wrote:It is very likely that she will qualify for a 50% retirement saving credit on the first $2,000 of her retirement savings so doing that to get the free $1,000 is a very good deal so helping her get that would be a lot of "bang of the buck".

If she did not do that for 2016 she can still likely get that is she makes a Roth contribution before the filing deadline.

The income numbers on this link are after a lot of subtractions and adjustments so even if her gross income is higher than that she could still qualify for it.

https://www.irs.gov/retirement-plans/pl ... ers-credit

Other than that at the age of 25 in her situation there are likely a lot of higher priories than retirement savings.


This is why I said OP needs to get familiar with various tax credits and how to optimize them.
*3!4!/5! wrote:Ditch the the tax preparer, because you need to become very familiar with various tax credits and how to optimize them, and it's best to do that playing with tax software (and reading the appropriate publications) yourself. Some strategies may be counterintuitive.

Retirement savers credit is NON-refundable, so you get nothing from it if there is no tax to subtract from. By contrast Child TC and EITC are refundable, and can be worth several thousand dollars.

gotlucky
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by gotlucky » Mon Jan 30, 2017 11:29 am

Quick thoughts:

- When a person doesn't have a long-term vision or understand compounding returns, the difference between a Roth IRA vs giving someone $5500 cash will be almost negligible. The Roth can be "raided" so it requires discipline in the same way that cash would. Don't be overly influenced by the oft-used mantra of "If you just invest $5500 for 10 years in your 20s, you'll be a millionaire at age 50!" Financial independence doesn't rely on Roths, 401ks, etc. It's all about discipline and setting priorities.

- Even a formal education doesn't guarantee that she'll make any more money. Does she love what she does today and is she excited to go to work? If so, have her look for opportunities there. Maybe she can one day own a nursing home or work as a manager of several homes. Perhaps she can build a placement network for people needing nursing homes. She doesn't need more formal education for that. I wouldn't invest in a formal education unless I had a plan (without an advanced degree or a degree in say, accounting or engineering, how much more can she make with a BA?). In the meantime, she's taking precious time away from her kids in their formative years.

- Her first responsibility is to make sure she can survive on her own. Her second responsibility is to make sure her children grow up to be independent adults. I wouldn't lose sight of these things. I don't think giving her money without a long-term plan is going to get her closer to either of those things.

- The grandkids just need to be loved, supported and taught to work hard and persevere. They are already learning a lot about grit. I wouldn't try to hide or soften that their father is in prison. I'd focus more on how to cope and handle adversity emphasizing that their father made poor choices but that doesn't have any bearing on the choices they should make.

alshayed
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by alshayed » Mon Jan 30, 2017 12:03 pm

alnukem wrote:25 Year Old Daughter-In-Law with 2 Great Kids, 3 & 4


alnukem wrote:I was thinking of telling her that if she contributes $5500 to a Roth, I would give her $200 every 2 weeks to contribute to her work's 401K


Do you know what her budget is? I like many others doubt very much that she could afford this. At her wage level right off the bat based on USDA cost of food they're probably spending 20% or more on groceries alone. Add another ~8% for FICA (SS/Medicare). Car expenses could easily be another 17% ($400 per month ?). Don't know where you/she live, but just a random guess on 2 bed apartment is 900-1400 per month. That's another 37% - 58% of her salary. Let's say utilities are only $100 per month or 4% of wages.

So basically even before state/federal tax withholding she's probably already committed to 86% ++ of wages. She likely has at most ~$4000 extra to spend per year even with you paying for daycare. And that will get eaten up pretty quickly by a cell phone, internet service, kids clothing, birthday/Christmas presents, a night eating out every now and then, etc.

My guess is she's fighting for her life with just living expenses and there's no way she can work on retirement goals. Help her get a better job or something that will make it easier for her to get ahead and focus on retirement.

aristotelian
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by aristotelian » Mon Jan 30, 2017 1:40 pm

Tough situation. The bottom line is she needs all the help she can get - saving for retirement, living expenses, and education/career development. Encouraging her to save for retirement may just add another burden. Also, from a strictly financial point of view, I don't see the point in contributing to the 401k unless there is an employer match. If you really want to help her, you ask her what would help the most, without trying to negotiate deals or control her behavior.

Another possibility to look into would be starting a 529 for her (instead of or in addition to the kids), then come up with a plan to help her go back to school. Maybe set a goal of starting a program once her kids are past daycare age and she will have a little more time and money. That would give her a goal to work toward, and give you a couple of years to start saving up for her. Also, as far as helping her goes, a 529 would give you the best bang for your buck since you would be paying with pre-tax dollars.

barnaclebob
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by barnaclebob » Mon Jan 30, 2017 1:59 pm

To be honest it doesnt sound like she makes enough to save for retirement. I would focus on helping her get into a more lucrative career path. Maybe becoming an RN instead of what I presume is being a nursing assistant. That would have a much better return and isn't subject to your son's poor behaviors to some extent.

alaskantraveler
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by alaskantraveler » Mon Jan 30, 2017 2:46 pm

She may also be eligible for the retirement saver's credit. Look into that.

alnukem
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by alnukem » Mon Jan 30, 2017 8:54 pm

Thank you all for helping me be more "objective". It's a pretty tough situation & I believe we are starting to have more of a Father/Daughter relationship. I do spring for the child care & we are enrolling the 4 year into a good parochial school which I will foot the bill for. I do stick money in her pocket on the off pay weeks & pick up odds & ends of groceries and help her with car maintenance & really love the babysitting part. I am actually going to let her live in the house I live in now, as I bought another house, it will cut her bills tremendously as it is very energy efficient. I have not mentioned anything about the retirement stuff to her & will not until she feels more settled. Thanks again for all your help!

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Pajamas
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Pajamas » Mon Jan 30, 2017 9:25 pm

It's great that you are giving your daughter in law and grandchildren so much support and it seems like you are on the right track. You might also consider starting 529 plans for your grandchildren's college expenses.

I agree that helping your daughter in law with education would be great if she is open to that. If she enjoys working in the nursing home she might want to go to school to get an associate degree in nursing or another health care area at a community college and then go on from there. Working full time and raising two children might be all she can reasonably handle, though. If so, maybe in a few years when the kids are both in school full-time.

carruthers209
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by carruthers209 » Mon Jan 30, 2017 9:39 pm

Might I suggest that you look at buying her a good laptop computer. I assume she has one but more likely than not it's not a reliable or dependable device. There are many on-line courses and certificates that she could earn in a field that she's interest in. That would allow her to stay at home with the kids while completing these courses and if using a community college, the cost of the courses would be very affordable. You are to be commended for helping support your grandkids and her in difficult circumstances. She's still very young and the investment in her career will probably pay off in a lifetime gain in salary and financial stability.

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teen persuasion
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by teen persuasion » Mon Jan 30, 2017 10:38 pm

alnukem wrote:I have a 25 Year Old Daughter-In-Law with 2 Great Kids, 3 & 4 & a Bum for a Son currently doing a 10 Year Stint in the Federal Pen. She is very nice & a good Mom. We have a very good relationship & the kids just love/ crave me. I want to help her become financially more independent. She is currently working at a nursing home making $14 a hour, which equals out to about 29K a year. I am sure she qualifies for Earned Income Credits especially with the Daycare costs which I spring for & are waiting for the tax preparer's calculations.
I was thinking of telling her that if she contributes $5500 to a Roth, I would give her $200 every 2 weeks to contribute to her work's 401K until all the matching funds are done & then to a Traditional IRA. I believe she will be receptive. I think this would give her versatility.
Now this is where I get lost. It seems like it would be advantageous to open a Taxable Account that I would fund. I believe she'll fall into the "0" tax rate & be able to Tax Harvest to keep her taxable profits at bay, yet build up equity & build a emergency fund.............What is the easiest way of doing this?

Thank you for your help & please excuse any anger I may have construed to my son......... drugs maybe our downfall!


Careful with a taxable account and EITC - too much taxable investment income (from dividends and tax gain harvesting) could make her ineligible for the EITC.

Her tax situation will depend on whether she is still married to your son, and if he had/has income, too. As other posters mentioned, to protect assets she might want to consider divorce. However, filing MFJ (vs head of household) she'd have near zero fed taxes, and higher EITC. Does your state match, at least partially, EITC and/or Child Tax Credit? Mine matches EITC at 30%, and CTC at 33%.

Contributions to a traditional 401k can increase EITC, by reducing AGI, but contributions to an IRA will not, so for her a 401k is better to use. Of course, she could use her refundable credits to either increase her contributions to the 401k, or to fund a Roth IRA like we do - a Roth IRA is better than traditional for her since there's no more tax to avoid and no benefit to EITC from using traditional, and the ability to withdraw contributions at any time from a Roth IRA makes it valuable as an emergency fund that won't trigger taxable investment income to disqualify her from the EITC. Does she have the discipline to leave a Roth IRA untouched except for an extreme emergency?

I'm not as pessimistic as others about being able to save at least something at her level of income. We have been raising 5 kids, and we've done it mainly on under $30k/year. Daycare is the one expense we did not have, though, so that is different, but it sounds like you are helping her there and with housing. Encourage her to at least contribute enough to get any matching in the 401k. Explore the rules for EITC and CTC to maximize those - they could be a boost of $7k+, more if any state matching. More saved to 401k could increase them, at least until her AGI drops to $23k-ish MFJ or $18k-ish HOH, so if you wish to subsidize her here it is multiplied.

Good luck.

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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by gwrvmd » Mon Jan 30, 2017 11:21 pm

A 529 for the kids has been mentioned. If you can support and encourage her such as getting more education, you could change the beneficiary of one of the policies to her and use it for her education. After she doesn't need it switch it back to the child and try to make up the difference. No one can get that money except who you want because you own the account all the time even if it is used this way........Gordon
Disciple of John Neff

alaskantraveler
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by alaskantraveler » Fri Feb 03, 2017 12:04 pm

teen persuasion wrote: Contributions to a traditional 401k can increase EITC, by reducing AGI, but contributions to an IRA will not, so for her a 401k is better to use.


Can you explain how 401K Contributions will increase EITC by reducing AGI and Traditional IRA contributions will not?

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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by *3!4!/5! » Fri Feb 03, 2017 4:08 pm

alaskantraveler wrote:
teen persuasion wrote: Contributions to a traditional 401k can increase EITC, by reducing AGI, but contributions to an IRA will not, so for her a 401k is better to use.


Can you explain how 401K Contributions will increase EITC by reducing AGI and Traditional IRA contributions will not?


Because it depends on both lines 7 and 38. See instructions.

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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by Dick D » Fri Feb 03, 2017 4:46 pm

I think the focus has to be on helping her get a better education so that she get get a better job.

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teen persuasion
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by teen persuasion » Sat Feb 04, 2017 8:39 am

alaskantraveler wrote:
teen persuasion wrote: Contributions to a traditional 401k can increase EITC, by reducing AGI, but contributions to an IRA will not, so for her a 401k is better to use.


Can you explain how 401K Contributions will increase EITC by reducing AGI and Traditional IRA contributions will not?


As *3!4!/5! stated, your EITC calculation is tested on BOTH line 7 wages (401k lowers this) and line 38 AGI (401k and tIRA lowers this). You get the lower credit of the comparison tests. Generally people are on the phaseout side of the credit curve, where lower income results in higher credits.

I suppose it's possible to be on the phase in side of the curve, where higher income nets you higher credits. I'll have to look at how that is handled, but it is pretty low income levels.

ETA: It looks like there's a test to see if you are at the threshold of phaseout beginning - below that point (~$18k AGI for single 1 child) only line 7 wages are used. Phase in income is to $9900 for single 1 child, then EITC plateaus. So I suppose <$9900 income you should prefer IRA over 401k, for EITC purposes, to increase your credit while saving for retirement. :shock:
Last edited by teen persuasion on Sat Feb 04, 2017 11:30 am, edited 1 time in total.

SleepKing
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Re: Please Help with 25 Year Old Daughter-In-Law.

Post by SleepKing » Sat Feb 04, 2017 11:17 am

I feel the best solution is as others have stated:

-She is 25 with many good earning years ahead of her. Help her advance her current job to something better. She will be better able to provide for herself and the grandkids. Becoming a LPN or RN is a great first step. Perhaps you could offer to assist with her tuition.
-I would not worry about DIL retirement, rather your grandchildren's college. You can set up and direct 529 for each.

Congratulations on being such a kind and generous person. Hopefully, your DIL will continue a positive relationship with you.

Best,
Sleepy

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