Here’s an idea for giving your adult children gifts that you might not have thought of. It not only provides security for the next generations of your family, but also does so without losing much, if any in taxes to Uncle Sam.
It involves doing something for your adult children that few families have thought of. Instead of putting cash in their hands (who knows what they might do with it!), you can make contributions directly into their retirement plans.
As Daniel Joss, CFP® describes, this provides you with a double benefit. Firstly, those contributions you make will grow over time, multiplying as the invested money makes returns and become worth much more than just cash today.
Secondly, if you make contributions to a Roth IRA on behalf of your children, they will receive this money entirely tax free when they come to draw money from their retirement fund. With tax rates only likely to climb higher in the future, you could be saving your children a lot of money today, by gifting them a Roth IRA.
So if you’re looking to provide security for your children, make sure this is one of the options you consider.
Important Tip: This strategy only works for children who earn “real” income. To see more about the penalties associated with opening a Roth IRA for your five year old son for example read this.
Still have questions on opening a Roth IRA for your children?