Who else's IRA would you (do you) fill?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
toto238
Posts: 1880
Joined: Wed Feb 05, 2014 2:39 am

Who else's IRA would you (do you) fill?

Post by toto238 » Thu Aug 28, 2014 4:42 pm

So for those who have enough income that they've completely filled their own tax-advantaged accounts, have you considered filling the IRA of another person before dumping it all in a taxable account, and what's your logic behind it?

For example, the most obvious choice is to fill your spouse's IRA.

But what about children? If you have adult children you could view it as an "early inheritance" for them. Or a very nice Christmas/birthday present.

What about parents? If you're an only child, there's at least a chance that it could be coming back to you after they pass.

Siblings? If your brother/sister needs a little help/encouragement with getting investing started, would you help them out?

Have you put money into an IRA for someone else, and what was your reasoning and/or goal?

livesoft
Posts: 62276
Joined: Thu Mar 01, 2007 8:00 pm

Re: Who else's IRA would you (do you) fill?

Post by livesoft » Thu Aug 28, 2014 5:07 pm

I fill my children's Roth IRAs. They are in college now (undergrad and grad).

Reasoning and goal: Get them started early. They spend all their meager earnings. I don't need the money. I already give them tens of thousands of dollars for their college expenses, so a Roth IRA contribution is but a drop in the bucket.
Wiki This signature message sponsored by sscritic: Learn to fish.

toto238
Posts: 1880
Joined: Wed Feb 05, 2014 2:39 am

Re: Who else's IRA would you (do you) fill?

Post by toto238 » Thu Aug 28, 2014 5:27 pm

When I get the money, I'm considering putting money in my mom's Roth IRA. She's in a situation where she's saved next to nothing for retirement, and her income is too low to max it out herself without help. I would fill my own and my wife's first.
I'm under no illusions I would ever receive any of it in an inheritance though. If she doesn't use the entire amount herself, which I doubt, she has 3 other children besides me.

User avatar
Peter Foley
Posts: 4497
Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: Who else's IRA would you (do you) fill?

Post by Peter Foley » Thu Aug 28, 2014 5:31 pm

Off and on we have contributed to our daughters' Roths. Neither they, nor their husbands, are in high paying jobs but they are all doing okay and are careful with their money. The cost of daycare has not allowed them much breathing room financially over the past year so I expect we will help out for the next few years.

User avatar
Zabar
Posts: 635
Joined: Thu Feb 27, 2014 9:05 pm
Location: San Francisco Bay Area

Re: Who else's IRA would you (do you) fill?

Post by Zabar » Thu Aug 28, 2014 10:02 pm

I matched all of my son's Roth IRA contributions through age 25. (E.g., he put in $1K, I gave him a check for $1K.)

During those years in which my wife didn't have earned income, I did a backdoor Roth for her account.

User avatar
DonCamillo
Posts: 1014
Joined: Tue Nov 26, 2013 10:27 pm
Location: Northern New Jersey

Re: Who else's IRA would you (do you) fill?

Post by DonCamillo » Thu Aug 28, 2014 10:31 pm

My wife is retired. I am not. I contribute to a Roth IRA at the $6500 maximum for each of us each year.

I have been thinking about contributing to a Roth for my grandchildren when they start part time jobs as teenagers. I am willing to match whatever each one earns up to $5,000 until they get to college. After that, I will contribute to college expenses instead. Hopefully they would have a good start in an investment that would not damage their FAFSA.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)

User avatar
celia
Posts: 8207
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Who else's IRA would you (do you) fill?

Post by celia » Thu Aug 28, 2014 10:40 pm

Don't forget that the person has to have EARNED (taxable) income (except for a spouse who can use other spouse's income for eligibility purposes). If your grandkids don't claim the income on their or their parents' return, I don't think they are eligible (eg, babysitting) and they probably wouldn't want to claim it if they had to pay FICA on that income.
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.

Nukeboilermaker
Posts: 289
Joined: Mon Apr 11, 2011 9:49 am

Re: Who else's IRA would you (do you) fill?

Post by Nukeboilermaker » Thu Aug 28, 2014 10:50 pm

I max out my wife's in either Roth or Traditional (preferred). I have been trying to think of ways to create a Roth for my daughter (16 months old) though i couldn't afford to max that out until a couple years down the road due to an up coming home purchase. The best way I can think of doing it though would be for her to be a "baby model" for all the home pictures and actually claim it as earned income.

jlawrence01
Posts: 1400
Joined: Mon Feb 25, 2013 1:34 am
Location: Southern AZ

Re: Who else's IRA would you (do you) fill?

Post by jlawrence01 » Thu Aug 28, 2014 11:17 pm

While I applaud the generosity of those who are funding non-spouses RIRA/TIRAs, are you really willing to give up control of that money at a young age? Once the money is gifted, it cannot be recovered.

What happens if the money is used for "wine, women, and song" as opposed to its intended purpose?

TheRightKost87
Posts: 280
Joined: Tue Aug 13, 2013 12:25 am
Location: Boston, MA

Re: Who else's IRA would you (do you) fill?

Post by TheRightKost87 » Thu Aug 28, 2014 11:26 pm

Zabar wrote:I matched all of my son's Roth IRA contributions through age 25. (E.g., he put in $1K, I gave him a check for $1K.)

During those years in which my wife didn't have earned income, I did a backdoor Roth for her account.
Would he then deposit the check you gave him in the IRA as well? Otherwise it'd just really be you contributing to his IRA if he kept the 1K
"The problem with diversification is that it works, whether or not we want it to"

User avatar
bertie wooster
Posts: 764
Joined: Mon Jun 25, 2007 5:14 pm

Re: Who else's IRA would you (do you) fill?

Post by bertie wooster » Fri Aug 29, 2014 12:36 am

Sadly, my parents do not currently fund my our my spouses IRA's (nor do my in-laws).

But when I was an undergrad many years ago, my Dad did max my Roth IRA for me, this was long before I had any clue what a Roth IRA was. It was extremely generous of him and I will do the same for my kids once they start working but aren't making much.
Last edited by bertie wooster on Fri Aug 29, 2014 12:38 am, edited 1 time in total.

investor1
Posts: 1040
Joined: Thu Mar 15, 2012 8:15 pm

Re: Who else's IRA would you (do you) fill?

Post by investor1 » Fri Aug 29, 2014 12:37 am

I'm upset that nobody said me...

toto238
Posts: 1880
Joined: Wed Feb 05, 2014 2:39 am

Re: Who else's IRA would you (do you) fill?

Post by toto238 » Fri Aug 29, 2014 12:46 am

investor1 wrote:I'm upset that nobody said me...
Just post your name, account number, routing number and social security number and maybe someone will! Also include DOB, your mother's maiden name, mailing address, and your driver's license number. Also, just in case, please include your credit card number, expiration date and CCV code.

dickenjb
Posts: 2941
Joined: Tue Jan 05, 2010 1:11 pm
Location: Philadelphia PA

Re: Who else's IRA would you (do you) fill?

Post by dickenjb » Fri Aug 29, 2014 6:35 am

I match the earnings of my two sons into their Roth IRA's.

The 20 year old stayed at college this summer so no earnings.

The 17 year old didn't get back from his exchange student gig in Germany until Aug 5th so he will be lucky to earn $1000 before the pool where he lifeguards closes on Labor Day.

To the person who says am I worried what they are going to spend it on - nah, it is their money.

User avatar
DonCamillo
Posts: 1014
Joined: Tue Nov 26, 2013 10:27 pm
Location: Northern New Jersey

Re: Who else's IRA would you (do you) fill?

Post by DonCamillo » Fri Aug 29, 2014 3:03 pm

jlawrence01 wrote: What happens if the money is used for "wine, women, and song" as opposed to its intended purpose?
That is only a problem for trust funds. Irresponsible behavior with a continuing stream of funding could result in the loss of future funds. They have an incentive to be responsible to keep Grandpa's contributions coming. I would set expectations when setting up the accounts with them. Plus Roth withdrawals have penalties for early withdrawal.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)

livesoft
Posts: 62276
Joined: Thu Mar 01, 2007 8:00 pm

Re: Who else's IRA would you (do you) fill?

Post by livesoft » Fri Aug 29, 2014 3:09 pm

DonCamillo wrote:Plus Roth withdrawals have penalties for early withdrawal.
Actually, I don't think Roth contributions have any penalties for early withdrawal. Of course, I don't tell my kids that.
Wiki This signature message sponsored by sscritic: Learn to fish.

toto238
Posts: 1880
Joined: Wed Feb 05, 2014 2:39 am

Re: Who else's IRA would you (do you) fill?

Post by toto238 » Fri Aug 29, 2014 3:17 pm

livesoft wrote:
DonCamillo wrote:Plus Roth withdrawals have penalties for early withdrawal.
Actually, I don't think Roth contributions have any penalties for early withdrawal. Of course, I don't tell my kids that.
Correct, however there are penalties on the earnings in the Roth. The contributions can be pulled out tax-free and penalty-free at any time. The earnings on those contributions are taxable and penalized if they're pulled out when you're under the age of 59.5 and it's been less than 5 years since your first contribution.

This is under the assumption that there's no conversions in the Roth, which complicates everything.

User avatar
Zabar
Posts: 635
Joined: Thu Feb 27, 2014 9:05 pm
Location: San Francisco Bay Area

Re: Who else's IRA would you (do you) fill?

Post by Zabar » Fri Aug 29, 2014 11:15 pm

TheRightKost87 wrote:
Zabar wrote:I matched all of my son's Roth IRA contributions through age 25. (E.g., he put in $1K, I gave him a check for $1K.)

During those years in which my wife didn't have earned income, I did a backdoor Roth for her account.
Would he then deposit the check you gave him in the IRA as well? Otherwise it'd just really be you contributing to his IRA if he kept the 1K
No. I simply reimbursed him for any deposits he made into his IRA. It was a way of incentivizing him to start saving for retirement early.

SGM
Posts: 2704
Joined: Wed Mar 23, 2011 4:46 am

Re: Who else's IRA would you (do you) fill?

Post by SGM » Sat Aug 30, 2014 5:26 am

I always funded spouse's IRA whether she worked or not. Before 2010 they went into non-deductible IRAs. After 2010 they were converted to a Roth. The reason is to maximize non taxable space and for inheritance purposes should we not need the funds.

I presently fund my children's IRAs to give them a head start and they are aware that they should not touch the funds until they are retired. I think they will appreciate the magic of compounding. I suspect that as they mature they will be very grateful. Happily they cover all their expenses with their employment income.

Post Reply