As a grandparent, there may be few things more important to you than the wellbeing of your grandchildren. As such, you may be very interested in helping them to financially prepare for the future. At Harvest Financial Planning, LLC, we can guide you through your options for doing that, including the possibility of opening a retirement plan for your grandchildren. Here’s what you should know—
Opening Retirement Accounts for Grandchildren
If you want to make sure that your grandchild has a cush retirement one day, it’s best that they start investing early; indeed, the earlier that they invest, the more time their money will have to grow. So starting a retirement account for your grandchild now may not be a bad idea!
However, there are a few things to be aware of.
First, while you may be able to start a retirement account for your grandchild, you won’t be able to do so until they are earning an income. That’s because in order to open an IRA or a Roth IRA, the Internal Revenue Services (IRS) requires that the beneficiary have an earned income. As such, you may not be able to open the IRA until your grandchild is working (usually around 16 years of age). What’s more, you’ll only be able to invest an amount that’s based on their earnings, not yours.
The other thing to consider is that once your grandchild turns 18, they will retain full control over the account. This isn’t necessarily a bad thing if you trust your grandchild to not misuse the money! If you do, though, there may be better options for saving available.
Other Options for Support Grandchildren in Saving for Retirement
Opening up a retirement account in your grandchild’s name is just one option for supporting them as they get older. Other options include setting up a trust, contributing to a 529 savings plan, or making other investments on their behalf. If you’re unsure about what investments make the most sense or what types of investment accounts (or other savings options) will yield the highest returns, you can consult with our financial advisors at Harvest Financial Planning, LLC. We can also help you to create an estate plan that prioritizes putting aside assets and savings for your chosen beneficiaries.
Learn More About Saving for Your Grandchild Today
As a grandparent, providing for your grandchild is top of mind. To learn more about ways to save for your grandchild and help them to have as strong a financial future as possible, call our financial planners at Harvest Financial Planning, LLC. We work with clients throughout Northwest Indiana. Our financial planners are certified, and we offer initial consultations free of charge.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.