IRA for my son?

[albireo13]

Is there a way I can setup and contribute to an IRA for my son?
He is 26yo but struggling.
I would like to do this for him.

 

[RunningBum]

I think he has to be the one to set it up since he is of age. Of course you could walk him through it. I guess if you had power of attorney you could do it, otherwise you'd basically be forging his signature and that is illegal, of course. As far as I know.

What I do for my son is gift him money, and request he put it towards that IRA. I suppose I could directly fund it, by either linking my bank account or by sending a check in.

If your son is low income a Roth IRA would probably suit him better than traditional IRA. He does have to have as much earned income as the IRA contribution. All the usual IRA rules apply.

I assume this would count as a gift and if you exceed $15K total for the year (I believe is the current amount) you would have to file a form for the excess. No direct tax on it, it just reduces your eventual lifetime estate exemption.

 

[kaneohe]

https://www.irs.gov/retirement-plan...etirement-savings-contributions-savers-credit

be sure to check out the saver's credit

 

[MI-Roger]

I assume this would count as a gift and if you exceed $15K total for the year (I believe is the current amount) you would have to file a form for the excess. No direct tax on it, it just reduces your eventual lifetime estate exemption.

I don't see this part as the best option.
Yes, you can gift an Early Inheritance but that requires specific tax forms to be filed and years of maintaining the documentation. The two earlier suggestions to: keep the amount below the current annual gift limit, or; file a form for the excess gift amount with the current year's taxes; are the cleanest and simplest methods.

 

[donheff]

I set up a Roth for my daughter and contribute to it each year. I coordinate with her to be sure the contributions remain within her earnings limits. Technically she should have set it up but no harm no foul. I did the same for my son long ago but no longer contribute since he is funding his own.

 

[RunningBum]

I don't see this part as the best option.
Yes, you can gift an Early Inheritance but that requires specific tax forms to be filed and years of maintaining the documentation. The two earlier suggestions to: keep the amount below the current annual gift limit, or; file a form for the excess gift amount with the current year's taxes; are the cleanest and simplest methods.

I meant this as a caution, not a recommended option. But the bolded part is the same thing as I was suggesting. I'm not sure why you disagree with what I put yet suggest the same thing by a different term.

 

[kannon]

Whole hardheartedly support young folks getting Roth IRAs. From age of 12 we pushed our kids to earn some type of income and then we gifted the funds for the IRA to them. Kids starting their IRAs when they are pre teens goes a long way. More grandparents/parents should push this idea.

 

[Stormy Kromer]

I did this for DS & DD when they first started having earned income. I helped them set up their own Roth IRA accounts at Vanguard and entered in my bank account as one of the linked accounts to fund it and sent in the money each year for about 5 years. Now they're funding them using monthly EFT's from their own accounts. It has worked well.

 

[HarveyS]

What a nice thought, and I wholeheartedly support it.

What I do for my son is gift him money, and request he put it towards that IRA.

If I were in your shoes, I would ask my son to spend 20 minutes on google and find out what IRA/Roth/HSA accounts are and why they are beneficial. Also what the restrictions are for each account. Then, I would sit with my son and have a discussion of the benefits of an IRA (trad. and Roth), as well as an HSA. Next, I would make an appointment with my Fido representative and let Fido explain the same things to him. Finally, have my DS select the accounts he needed and fill out the forms to open said accounts with the Fido reps help. In essence, building a relationship between DS and the rep, and acting as a consultant not a supervisor.

If so inclined, as RB suggested, gift him the $$ and let him invest it. He should decide how to invest the $ after discussions with me or Fido rep.

Just an FYI, this is what I actually did with my DD. It is very satisfying today to see her managing this herself. (she's 21) Also, I know if I'm not around she can handle it.

 

[MI-Roger]

I meant this as a caution, not a recommended option. But the bolded part is the same thing as I was suggesting. I'm not sure why you disagree with what I put yet suggest the same thing by a different term.

I guess we each interpreted the OP's question differently.

I agree that your recommendation to treat it as an Early Inheritance is the best solution IF the OP is planning to contribute one or a few large sums to quickly fund the IRA.

I interpreted the question as how to fund an IRA via a longer term series of smaller cash infusions. In this scenario keeping the money amounts below the taxable limits to avoid taxes, or only slightly above the limits and file each tax year, appear to be the better methods by eliminating the need to archive tax records for potentially decades.

 

[pb4uski]

Is there a way I can setup and contribute to an IRA for my son?
He is 26yo but struggling.
I would like to do this for him.

You can certainly do it with him. Does he have earned income? If so, he could set up a IRA (probably a Roth IRA would be best) and then can transfer money into it. You could do it all if you wish or offer to match his contributions... either 1:1 or 2:1 or whatever you wish.

If he is struggling financially but earns enought to pay taxes (over $12,200 in 2019) then he would likely be eligible for the Retirement Savers Credit and could get as much as 50% of contributions returned to him in tax savings.

For the last few years DS has done this. In 2016 and 2017 we were able to design his contributions so he ended up getting back his total withholding for the year.

https://www.nerdwallet.com/blog/taxes/can-you-take-the-savers-credit/

 

[RunningBum]

I guess we each interpreted the OP's question differently.

I agree that your recommendation to treat it as an Early Inheritance is the best solution IF the OP is planning to contribute one or a few large sums to quickly fund the IRA.

I interpreted the question as how to fund an IRA via a longer term series of smaller cash infusions. In this scenario keeping the money amounts below the taxable limits to avoid taxes, or only slightly above the limits and file each tax year, appear to be the better methods by eliminating the need to archive tax records for potentially decades.

I'm either confused by what your saying, or you're confused by what I'm saying, or both. I suspect we're trying to say the same thing, more or less. I'm not sure why you are using the term Early Inheritance for my post since I never used it, and it seems to have some meaning to you that I didn't intend.

There is a $6000 limit on IRA contributions, so there's no way he's going to be able to make a larger contribution in one year. That's simply not an option, and I never suggested he try to contribute more to the IRA somehow. Perhaps I wasn't clear on that.

What I was trying to say is that IF he is planning or has already gifted more than $9000 outside of the IRA help, he is going to have to do some extra paperwork if his total gift for the year exceeds $15K ($6K IRA + $9K other). It is not a tax, it is merely a reduction of the lifetime estate exemption. I'm not suggesting he do it, nor am I suggesting he shouldn't, but merely pointing out that above $15K gifting from one person to another causes some extra paperwork. I don't even know what it entails since I've always stayed at or under the limit. If the OP is married, he and his wife can each gift $15K. If the son is married they can each gift $15K to the spouse as well. I only note that for completeness.