Would you contribute to your kid's 401K ?

[exnavynuke]

Quote:

Originally Posted by vipertom1970 Sorry, I did not my self clear. She is my only child and she is fugal but west LA is so expensive that she and her room mates each pays $1,300 per month for an ok condo. She is turning 22 and I want her to max out her 401k ASAP with her monthly checks first so she can be in a lower tax bracket and maybe she will get a nice tax return. From breaking down her monthly budget, she needs around $300 from me if she maxes out her 401k.

Quote:

Originally Posted by Meadbh So, she’s a new Nurse, earning $82,000 per annum, paying $15,600 (19% of her income) in rent. Let’s say she pays 30% in taxes, that’s $24,600, leaving her with $41,800 for food, clothing, savings and entertainment. That looks totally doable to me. Why not let her get on with being an adult?

Yeah, I must be missing some major budget items of hers or vastly underestimating them. Sure, LA is expensive, but most of that HCOL is due to housing which, at $1,300/month, she isn't paying an exorbitant amount for. Even if we subtract $18k for 410k contribution out of that $41.8k, she would still have almost $2,000 per month to spend on the rest of her bills plus entertainment each month - which is more than reasonable for most people her age.

[RunningBum]

I feel like the choice is a personal one. You don't have to let The Millionaire Next Door book make the rules. It's a good book but I'm never going to do everything it says.

You know your daughter best. Most likely by now if she's financially responsible, making up for her 401K contribution won't change that. Likewise, if she's not, withholding the money probably won't change anything either.

[pb4uski]

Quote:

Originally Posted by vipertom1970 I am 48 and will only work 2 more years with around 5M in assets with ZERO debt. My daughter just graduated from UCLA making around $82,000 with ZERO debt and will participate in the nurse pension program(max out $8,000). She also has a 401K program but the standard of living is so high in West LA that if she maxes out then she will not have a penny left each month. My plan is to have her maxes out her 401k and I will give here a monthly miscellaneous spending so she can get her in a lower tax bracket. Is this a right thing to do or does anyone has a better plan ? Thanks Tom

I think that is fine. From what you wrote it sounds like the nurse pension program is contributory... so she is already saving $8k of her $82k in earnings? Also, does the 401k match? Does it have some decent low-cost investmetn options?

Perhaps what you might do is offer to match any retirement savings that she makes 100% with the stipulation that the match also go into retirement savings. That way, she can max out her 401k and pension but your match will help her towards her living expenses and it will reduce your estate.

[Danmar]

It all depends on your kid and your relationship with her. I have helped my only daughter out a fair bit. My view is that struggle is overrated. But I understand and appreciate the alternative view.

For instance the real estate market in Toronto is very expensive. Without assistance from a parent, most young people would be limited to living in an apartment. So I gifted her enough for a down payment. She and her husband are hard working, sensible, financially responsible young people. She doesn’t act entitled. If I thought this assistance would ruin her work ethic or ambition, I wouldn’t give it. I figure if you have done a good job of parenting and showing a good financial example, the chances are slim a little financial help would “ruin” them.

In the end she will inherit the vast majority of our wealth. Seems less than optimal to wait until we are dead to give some of it to her. We can easily afford it now. Go with your instincts.

[Danmar]

Quote:

Originally Posted by RunningBum I feel like the choice is a personal one. You don't have to let The Millionaire Next Door book make the rules. It's a good book but I'm never going to do everything it says. You know your daughter best. Most likely by now if she's financially responsible, making up for her 401K contribution won't change that. Likewise, if she's not, withholding the money probably won't change anything either.

+1.

[targatom2019]

Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own.

yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus. Everything in West LA where she works is very expensive. A cheap gym she could find was $120 per month.

What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

[Danmar]

Quote:

Originally Posted by vipertom1970 Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own. yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus. What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

Sounds very reasonable to me. Why did you think anonymous advice from an internet chat room would be useful for a decision like this? Maybe you have reservations?

[Meadbh]

Quote:

Originally Posted by vipertom1970 Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own. yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus. Everything in West LA where she works is very expensive. A cheap gym she could find was $120 per month. What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

Clearly your mind was already made up before you posted your inquiry. I’m not sure what you hoped to achieve by soliciting our input.

Your daughter is a fortunate young woman to graduate from Nursing school to a great career, free of debt, with additional financial support from generous parents. I wish her success in her career.

[targatom2019]

Quote:

Originally Posted by Meadbh Clearly your mind was already made up before you posted your inquiry. I’m not sure what you hoped to achieve by soliciting our input. Your daughter is a fortunate young woman to graduate from Nursing school to a great career, free of debt, with additional financial support from generous parents. I wish her success in her career.

I just asked my wife couple minus ago and so far My daughter only got her first bi-weekly check but some how they took so much out which left her nothing. I am hoping to see her next 3 checks to see if I even have to help her.

[Calico]

Quote:

Originally Posted by vipertom1970 I just asked my wife couple minus ago and so far My daughter only got her first bi-weekly check but some how they took so much out which left her nothing. I am hoping to see her next 3 checks to see if I even have to help her.

So she received a check for $0.00? Seems quite odd.

[targatom2019]

Quote:

Originally Posted by Calico So she received a check for $0.00? Seems quite odd.

Sorry, English is not my first language and I did not explain correctly. What she took home on her very first check minus the monthly necessities left her with $230 at the end. This is without 401k contribution.

[Jerry1]

Lot's of good advice and I saw it mentioned in a post or two. Fund a ROTH. Good to teach her about savings and compounding, but a ROTH can also teach her about taxes and how to keep the Government out of her pocket (at least a bit). I'm not sure her work and financial situation will allow, but if it does, I would get some money in a ROTH. I'm sitting here at 56 and realizing that I'd have more options if I would have saved more in after tax vehicles. Most of my money is in 401K/IRA and I'm working on learning how best to spend that money with the minimum tax bit.

[bw5972]

"The worst thing you can do for those you love is the things they could and should do themselves."

Abraham Lincoln

[Bamaman]

Quote:

Originally Posted by iloveyoga You are very wealthy, but I would still let her do it on her own, I agree with many of the reasons listed here. IMO.

I agree about kids starting life to stand on their own two feet. I was just thinking about my 47 year old niece working in her father's business in a menial $10 an hour job. Her father pays for her $600k hojse, she drives a new Lexus and she takes lavish trips to Europe twice yearly. My BIL pays for 2 private school tuitions @$20k each. My Sister gave her a 5 carat diamond ring she was no longer wearing. My niece doubts remarrying is in her future.

My BIL is 70 years old and has had one bout of cancer (caught quick.). He has seen three of his closest die in the last 18 months and mortality has to be on his mind. My sister is showing signs of memory loss.

I just wonder how my niece is going to perform since she is completely unprepared for the real world.

It is great to have financial security in your family's future, but the kids must know how to handle money. The school of slightly hard knocks never hurt anyone.

[MarieIG]

I started Roths for my kiddos. It took some longer than others, but it got them excited to see their money grow and they have added to it. Two of my kiddos who both work for the Federal Government have gotten extremely disciplined with their savings. (All have turned out to be pretty financially responsible except for the eldest, and even he eventually got the Roth on autopilot.)

There have been a lot of speeches from their DM about budgeting, and a lot of explanations about index funds and the fact that the stock market is going to have some significant drops and not to panic.

Oh, and my parents gave me some nice gifts over the years, gave me a downpayment for the house and it did not make me a spendthrift or overly dependant. My father certainly instilled in me fiscal responsibility and a work ethic.


Have I ever said no. Absolutely.

[Elbata]

Sounds to me like you're a great dad, and daughter is most responsible.

To fully fund 401K, being that young, is quite an achievement. Congratulations to you both.

[enginerd]

Quote:

Originally Posted by vipertom1970 Sorry, English is not my first language and I did not explain correctly. What she took home on her very first check minus the monthly necessities left her with $230 at the end. This is without 401k contribution.

This happens sometimes at my Megacorp with new employees. They start half way thru a pay period and so the first check is already small. Then several of the benefit payments are pulled out as a full pay period. It can also be confusing because the new employee might work a full 2 weeks but the pay period is delayed a week, so they only receive a half check.

As a rule, always double check your first paycheck to make sure all your benefits and deductions are being applied correctly. Call Human Resources even if you’re unsure.

[Aiming_4_55]

Congrats ViperTom - you have many great accomplishments. We are very similar in a few ways, i.e. English is my 2nd or 3rd language, CA resident, sense of loyalty to employer, net worth, own rental properties, kids, started with about zero $$$, targeted ER around 50 or 55, etc.

Further providing to your child is a personal choice. It can be assistance with 401k, first car, first condo/house, vacation, wedding, etc. As long as she values the funds like you and wise with it's application, I say go for it as long as you are not needing those funds to support the life you want. If the child is not responsible, does not appreciate it, seems spoiled, etc, I would not assist. If she ever withdraw funds from the 401k, I would not fund in the future.

My kids are much younger than your daughter, but when the time comes, I may pay them as a teenager for helping me with a rental, so I can pay them/contribute to a Roth or 401k. With the Roth comes an opportunity to teach them more about money, taxes, investing, compounding, etc. When they work for someone else, I will encourage them to leverage all investment options available, i.e. Roth, 401k, FSA, HSA, etc.

As a side note, she may want to look for discounts via her employer on the gym membership. $120/month may or may not be high, depends on the gym. We belong to the YMCA and family membership is under $100/month, but it's only an YMCA and meets our needs for the time being.

As for the paycheck, try the online ADP payroll calculator. There is one for salary and another for hourly.

https://www.adp.com/tools-and-resour...alculator.aspx

With a salary of $82k, semi-monthly paycheck, filing single, 1 withholding allowance, I receive the below numbers. Deductions for benefits, FSA, HSA, pension, 401k, etc. are not included yet. Some employers pay every 2 weeks vs. semi-monthly, so that will adjust the numbers.

Gross Pay 3416.67
Federal 610.47
Fica 211.83
Medicare 49.54
State 214.84
SDI 30.75

Net Pay $2,299.24

[bclover]

Quote:

Originally Posted by REWahoo Would you contribute to your kid's 401K ? We made sure they were debt-free the day they got their undergraduate degree. To my way of thinking that's a huge contribution to their 401k.

That's what I remind the minions of all the time. My youngest is graduating and I gave him the suggestion to ask his classmates how much they have in student loans.

anyhoo, my oldest also got a financial incentive to move out (gift of first and last months rent)

Basically imo there are no set hard rules. you know your kids. Now what I'm thinking about doing is "matching" my kids 401K contributions. neither has a great job yet but I don't want them feeling that I'm going to payroll their savings.

[donheff]

I see nothing wrong with contributing a bit to your daughter's future if you have covered yourself first. My daughter is a teacher. She maxes out her 401K and I fund some of her Roth. I match the amount I dump in my son's kids' 526 accounts. When she has her first kid I will start contributing to him or her with the difference going to DD. My parents' "even Stephen" philosophy rubbed off on me.