So my son who is 16 has his first "real" job this summer. He wanted to get a summer job with his buddies and is working the boat launch pay booth at the lake. He puts up some hay and sells a few hogs and steers every year but this is his first 1099 job. So my question is would he be better to do a Roth which I believe he can put his whole check into? Or set up a brokerage account like with Fidelity? I want something he can easily use and not be tied to locally since he will be leaving for the military in a year and a half and I want him to be able to add to it. He makes enough farmimg to keep him in spending money and when he goes to the military he will probably sell his hay eqipment and have about $15K to add to something. Just wanting to get him going on the right path and learn to keep adding and never get into the account and he will be sitting pretty good later in life.
Roth for a kid?
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Addicting
Well-known member
If he goes into the military.. as a former recruiter, there are a lot of plans that change in a year and half of life. Not trying to jinx him, just being real with you.
I would look into a local credit union investment account. Fees are low and he has access to it in a few days if he needs it.
I would look into a local credit union investment account. Fees are low and he has access to it in a few days if he needs it.
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npaden
Well-known member
We setup a Roth IRA for my son from his earnings last summer. I have other investments at Fidelity so it was a very easy deal to set it up for him over there and invest it in an index fund. Most likely never going to be at a lower tax bracket (zero) than now so it seems like a no brainer for me to put it in a Roth for him.
Roth IRA for Kids | Plan Benefits, Eligibility, and Investment Options | Fidelity
Opening a Roth IRA for kids can help them get a head start on saving for their financial future. Discover the benefits of helping a child invest early at Fidelity.
www.fidelity.com
SD_Prairie_Goat
Well-known member
What does he want to do with the money? If it's for anything other than retirement you're better off putting it in a brokerage account. Most are very liquid until you get to high dollar amounts as well.
jryoung
Well-known member
Time in the market.
Roths are easy to set up, my son started working for us last year at 12 and we maxed out his contribution, which will be the plan until he's 18 and likely off to college. But, doing our best to imprint on him, to always put something away.
Roths are easy to set up, my son started working for us last year at 12 and we maxed out his contribution, which will be the plan until he's 18 and likely off to college. But, doing our best to imprint on him, to always put something away.
This is a great point.
The money will be saved for retirement and or to buy a farm. His plans are the Air Force Academy but he will apply to West Point also, and maybe the Coast Guard Academy. He wants to do his 20 years and retire and have a little farm. I hope it all works out for him. I don’t want him having to work like I do. I’m behind both my kids 100% and support them the best I can.
+1 on Fidelity brokerage account and fund his Roth with that. As been said, time in the market is very important. Thumbs up on the index fund too.
Keep in mind the five year rule.
www.investopedia.com
Bonus... Fidelity has a 2% cash back credit card. I've been using for 10+ years and recommend looking into it if appropriate.
Keep in mind the five year rule.
What Is the Roth IRA 5-Year Rule? Withdrawals, Conversions, and Beneficiaries
The Roth IRA five-year rule applies in three situations and dictates whether withdrawals get dinged with penalties.
Bonus... Fidelity has a 2% cash back credit card. I've been using for 10+ years and recommend looking into it if appropriate.
ismith
Well-known member
He will have the opportunity to put money into a TSP account which is fairly decent.
Addicting
Well-known member
If you haven’t looked into it, it’s not 20 and out anymore like the old days. Now It’s a 401k type plan thru the Thrift Savings Plan. They can leave whenever and take it with them.
None of that is accessible to buy a farm without a tax penalty unless he is retirement age. So it would be more important to have these funds not in a retirement account so he has less tax implications when he wants to use it at say 40.
Thank you. I’m really hoping he gets into the academy that’s been his dream and he’s worked very hard building up his resume for the Academy
I will look into the all the stuff you guys have suggested
Addicting
Well-known member
I wish him the best, we need young men with the smarts, drive, and devotion to serve.
If he doesn’t make the academy his back up plan is ROTC at the University of Wyoming
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Open an Roth IRA account at Fidelity. Invest in S&P 500 fund FXAIX. He can contribute $7000 for 2024. Easy to link to his bank account and transfer his paycheck to Fidelity. If he makes more than that, he can open a brokerage account with Fidelity as well in a taxable account. Invest this depending on objectives and time frame.
If you can, you could reimburse him for some of what he puts into the accounts.
If you can, you could reimburse him for some of what he puts into the accounts.
RemingtonRules
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contributions to a Roth IRA can be withdrawn at any time without penalty or tax because income taxes have already been paid on the contributed funds. However, earnings in a Roth IRA may be subject to taxes and penalties.
I would go Roth
I would go Roth
ismith
Well-known member
I doubt you could purchase one with the current SGLI payout either.
jeff_gibbons
Well-known member
This is exactly what I’d suggest and am telling my kids to do minus reimbursement
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Forkyfinder
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I wouldnt necessarily focus on retirement funds.
A brokerage making a good return would be a good move - especially for the flexibility.
A brokerage making a good return would be a good move - especially for the flexibility.
Mountain Man
Well-known member
It’s great to see questions like this on this forum!
The key with financial decisions is understanding when you want/need to have access to the money. The best decision for his retirement is to open a Roth. As stated previously, he could withdraw the amount he contributed penalty free at any time. The returns would need to be left untouched until 59.5. It is best if the whole amount is left untouched. I started my Roth when I was 20 years old and I wish I had started even earlier.
If he is 100% sure he is going to want to spend that money in the next 10-20 years, then a brokerage account with an S&P 500 index fund is probably the better option.
If your son ends up joining the military, I recommend he max out his contribution limit for the Roth TSP. It is awesome to be able to contribute so much money to a Roth in the TSP program. This account would be separate from the limits of a normal Roth IRA so he could contribute to both if he wants.
The key with financial decisions is understanding when you want/need to have access to the money. The best decision for his retirement is to open a Roth. As stated previously, he could withdraw the amount he contributed penalty free at any time. The returns would need to be left untouched until 59.5. It is best if the whole amount is left untouched. I started my Roth when I was 20 years old and I wish I had started even earlier.
If he is 100% sure he is going to want to spend that money in the next 10-20 years, then a brokerage account with an S&P 500 index fund is probably the better option.
If your son ends up joining the military, I recommend he max out his contribution limit for the Roth TSP. It is awesome to be able to contribute so much money to a Roth in the TSP program. This account would be separate from the limits of a normal Roth IRA so he could contribute to both if he wants.
