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Newbie to ROTH - 23yo grandson
Old 01-01-2020, 11:32 AM   #1
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Newbie to ROTH - 23yo grandson

He will be graduating in May and I want to start his Roth for him. I did this for my DS when he graduated- sort of a family help up. He did share his debts with me.

Currently only earns $20hr will go to $25 hr if he stays with same school district. Owes 16k!!(WTF) on student loans bc he never turned in his savings bonds as he went along. Will owe 8k on graduation. Pays $600 month for his share rent. No cc debt. No other debt. Owns car outright. Has other savings (summertime) and option of working 10 hrs a week for SF but that would cut into his Symphony time (minimal pay). So I'm thinking if putting 5500 into Roth in SCHB and letting him sweat some of that 8k himself.

WWYD?
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Old 01-01-2020, 11:42 AM   #2
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$16k in student loans is nothing... and $8k is even better. IMO modest amounts of student loan debt are good debt... investing with a good likelihood of a postitive return.

What is he earning on those savings bonds? I'm guessing close to what he is paying in student loan interest. If so, I think keeping the savings bonds was smart.... you can't get that interest rate of return today and the student loan interest is only for a couple years.

What you might to is to offer to match whatever he saves in a Roth.... perhaps 2:1 for the first 2-3 years and 1:1 after that.
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Old 01-01-2020, 12:48 PM   #3
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What is he earning on those savings bonds? I'm guessing close to what he is paying in student loan interest.
he said student loans don't incur interest until 9 months after graduation
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What you might to is to offer to match whatever he saves in a Roth.... perhaps 2:1 for the first 2-3 years and 1:1 after that.
Actually that's a GREAT idea as it encourages him to save himself. 100%-200% return is hard to pass up. Not sure if teachers can have Roths as they have a retirement program at work which he isn't eligible to right now. Have time to look into that.
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Old 01-02-2020, 01:11 PM   #4
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I'm thinking of doing the same for my 2 DD's. Just imagine the compounding of 40-45 years! It's a beautiful thing to do.
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Old 01-02-2020, 02:38 PM   #5
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... Not sure if teachers can have Roths as they have a retirement program at work which he isn't eligible to right now. Have time to look into that.
Yes, he can contribute to a 401k/403b and a Roth or tIRA.

https://www.irs.gov/retirement-plans...ibution-limits

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Can I contribute to an IRA if I participate in a retirement plan at work?
You can contribute to a traditional or Roth IRA whether or not you participate in another retirement plan through your employer or business. However, you might not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.
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Old 01-03-2020, 02:49 PM   #6
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Yes, he can contribute to a 401k/403b and a Roth or tIRA.

https://www.irs.gov/retirement-plans...ibution-limits
So I'll jump start him & continue matching what he puts in for 2-3 years. By then it should be a habit
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