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Too expensive - 0.81% expense ratio. Vanguard's target retirement funds are much cheaper.
I'd also go with all equities if you're going to leave it for 30 years. Maybe get more conservative in the later years of the 30 year period. The kids will only be 36-37 at the expiration of the 30 year period.
Check out Vanguard "Lifestrategy" series of funds with varying risk profiles if you want a bond/fixed income component.
No idea. Going forward, I'd expect similar performance to a 60/40 SP500/EAFE mix, less the 0.25% expense ratio.
The total us market also includes a small portion of mid/small caps and the total int'l index at VG includes emerging mkts while EAFE doesn't. The small caps and emerging markets (in this guy's opinion) might add a little more return over 30 years.
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Join Date: Mar 2003
Posts: 10,537
Also pay attention to fund minimums. *The UTMA I set up for my daughter last year nly has a small amount in it, so options are somewhat limited. *For now, I have it in SWBGX, but I will move it to something cheaper as it grows. *If yo go to VG, you could plump for the STAR fund.
While I'm on the subject what does everyone think of Roth IRA's for Kids.
Little Johnny has a paper route and gets earned income; he qualifies, as long as mom and dad don't contribute over his income limit?
I asked a CPA friend about this and said that as long as a child has earned income, they can contribute to an IRA. That income can come from any source as long as it is taxable, to date; there are no rulings or complaints from the IRS with this approach.
I think a Roth compounding for 50 years is pretty exciting, as long as junior doesn't squander it when he takes control.
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"Those who think it cannot be done, need to stay out of the way of those of us doing it."
Another thing you can do is to set up a DRIP plan. For our grandaughter we openned a DRIP stock in her name with her father as guardian. We picked WEC (Wisconsin Energy) which is pretty stable. After the initiation of the plan we put in all of $50 a month but we figure that will be useful after 18 years. There are no fees involved and it will be some time before taxes will even have to be considered and the tax rules may change by then. If you pick a decent stable stock you will probably beat the S&P500 especially as there are no fees involved. Of course, if you choose wrong there could be a low return. Not a diversified approach but ultimately my younger boy at home, his older brother, current & future grandchildren will be more supported by my cash flow than by a specific stock or fund.
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“There are only two ways to live your life. One is as though nothing is a miracle. The
other is as though everything is a miracle.” - Albert Einstein
Yeah, we've always been concerned about UGMA and stopped putting money in them years ago. The kid gets the money at 18 and you don't have any legal right or say in the matter.
We've taken to funnelling $ to the kids through a Crummey Trust which gives you lots more control on how and when they get the funds. Also 529 and I-Bonds which can be used for college. I suppose you could shake down the UGMA for the first years' tuition in college and solve that issue. Or transfer the UGMA funds to a Crummey Trust sometime prior to age 18.
And Psyop -- we love the idea of a Roth for kids. With longer life expectancy, you may not actually die off until your kid is well into his or her own retirement, so having their own Roth could help them a lot then. Just make sure the $ is earned income and not interest, allowances or gifts. I worked out once that funding it to the max (4 k or so per year) for just 10 years during their teens and early 20s would give them a real (inflation-adjusted) 500k balance at normal retirement age. (65).
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ER for 8 years; living off 4.3% of savings (and a few book royalties ;-)
We've taken to funnelling $ to the kids through a Crummey Trust which gives you lots more control on how and when they get the funds.* Also 529 and I-Bonds which can be used for college.* I suppose you could shake down the UGMA for the first years' tuition in college and solve that issue.* Or transfer the UGMA funds to a Crummey Trust sometime prior to age 18.
I think we're going to spend it down at college (UTMAs end at age 21) but we'll have to take another Crummey look...
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* For more info see "About Me" in my profile.
Is there a significance to the 30 years? Most UGMAs become the "minor's" property at 18, most UTMAs at 21.
We've been asking you that question over here, Lance--
I teach my kids about investing; I use Justin Ford’s “Seeds of Wealth” approach. My kids have 3 jars: Investing, Spending and Charity
Quote from last Christmas
My Son “I am going to buy a big house someday and you can come visit me whenever you want Grandpa!”
Grandpa “How are you going to buy the big house”
My Son “I’m investing Grandpa”
Grandpa proceeds to spit eggnog on the floor in laughter.
The idea is for the kids to learn about investing as they grow up and eventually take over the fund and manage it themselves. With an IRA, there are penalties for withdrawal which might discourage liquidation more. If they blow it, at least I tried.
I currently pay my kids from my LLC for chores and things they can do for the LLC (Stack papers, pull weeds, etc.) This may be questionable as a “job” but look at what some people do for a living. I pay them a reasonable wage ($50 per month) which gets invested in the Roth.
I have also heard of people using there kids for promo items (Posters, Literature) and paying them.
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"Those who think it cannot be done, need to stay out of the way of those of us doing it."
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