No, it’s not a typo. The 80’s band The Fixx had a hit song titled One Thing Leads to Another. Which is what occurred to me when I saw this cartoon. Now you know.
Joe
The what? I have a confession – I made it up. Actually, “Kiddie Roth” turns up a few Google hits, so maybe I wasn’t even first. But let me get to the point, why a Kiddie Roth? And why now?
I’ll answer the second question first. Jane 2.0 (my 11 year old) had taken the initiative to send out letters of introduction in June to a few local families. She described her prior experience taking care of younger children, and told of her interest in positions available for babysitting/mother’s help. I sure admired her initiative and was glad when she heard back from some moms. This got me thinking, of course. J2 now has earned income.
If you are a regular reader, you’re aware that I have mixed feelings about the Roth IRA. More so for the mistake I believe is made when making large conversions from the traditional IRA. At least the damage is minimal on an annual deposit, if in hindsight, the traditional would have been better, we’re talking a few hundred dollars in extra taxes, not tens or hundreds of thousands. On the other hand, there are times the Roth is a great idea, and this is one of those times.
A dependent minor still gets her own standard deduction for earned income, $5,700 for 2009 & 2010. Since we are talking about only $1500 or so earned this summer, there’s no point in looking at a traditional IRA, but a Roth is ideal. This money will grow tax free until she taps it for retirement. At 8%, over 50 years this money can grow to $70K, at 10%, $176K. I recall an example of early savings from years ago, comparing a 21 year old who makes 5 years of deposits and stops. Someone else starts making the same size deposits at 26, and never catches up. In other words, you can have twice the lifetime return by starting 5 years early. This made me thing how much better a head start I can give my daughter by starting her Roth now.
When I began to discuss this topic, two points came up. No, J2 isn’t going to put this money into the Roth. I plan to give her money that she got got when she was younger and put aside for her. So long as she has earned income, the individual dollars don’t need to be traced to the Roth. Not all brokers allow IRAs for minors. I use Schwab, and they offer an account specifically designated as a Custodial IRA.
When I read articles such as How Much Do You Need To Retire? The 10% Rule, I’m reminded it’s never too early to get started.
What do you think? Is a Roth in your child’s future?
Joe
A few weeks back, I published “Evernote on the iPad”, in which I described a method to let you capture links or webs pages to Evernote on the iPad, as I saw no “save to Evernote” option. A fellow iPad fan set me straight, there’s a better way, much better in fact. Let’s start by going to the Evernote application,
Check the box to use the Safari clipper plugin. Next, you are looking at the top of the screen when the iPad is plugged in and ready to sync. Go to the info tab, and be sure that Sync Safari Bookmarks is checked.
Last – I love Evernote. I have a few screens full of apps, but if I had to choose, this is the killer app. This is the missing link right here. The bookmarklet needed to put “add to Evernote” on your Safari menu bar. When you go to that menubar on Safari (or Firefox, for that matter) bookmarks shown are simply that, bookmarks as we know them. But, there’s now a new breed of bookmarklets which are little javascript applications and do more than just take you to a web address. Open Safari on your desktop, and drag this image to your linkbar:
You should now see a link that says “clip to Evernote on the linkbar. Almost done. Now, sync your iPad.
You now will see that bookmarklet appear along with any other links on your Safari linkbar. If you use the Bookmarking site Delicious or other sites that use these bookmarklets, this process will set you up to use them on your iPad. All but the Yahoo link are this type of bookmarklet.
I hope you find this useful. Let me know if you you use any of these features.
Joe
This past week, one bit of news seemed to be more popular on the finance front than others, the news of the death of George Steinbrenner and the impact of the 2010 estate tax laws.
Bible Money Matters discussed this in his No Estate Tax In 2010 Means George Steinbrenner’s Family And Others Will Save Millions In Taxes.
At Aggressive Progress, The Steinbrenner Way offered a partisan view of the topic. I’m not judging, just offering a variety of takes on this matter.
Kelly Phillips Erb (AKA TaxGirl) wrote Steinbrenner’s final win — over estate taxes. Kelly is a pro who understands this complex topic better than most, she does a great job in this article covering the issue regarding step up in basis, which does not occur in 2010 (not beyond a token amount).
Kay Bell mentioned this as well, but her post was titled The Boss’ estate tax bonanza and for a moment, I was expecting to find out how Bruce Springsteen was handling his estate planning.
The Oblivious Investor answers, Student IRA: Can a Student Open a Roth IRA? — Ok, I’ll ruin the surprise, yes they can, and Mike tells you why they should.
At Money Help For Christians, I enjoyed Expensive Shopping is Good | How To Shop For Value, Not Price, a post that help address the age old frugal vs cheap debate.
At Green Panda Treehouse, Mike gives us a glimpse of his Financial Timeline. A mini financial autobiography, and an interesting read. We all have a story of how we got where we are today, and I enjoy when others share their experience.
Financially Poor discussed Why Won’t Money Buy Happiness? This is another recurring theme, the discussion will continue. I suppose it depends on more factors than just money. There are happy poor people, and miserable rich people, so the correlation of money and happiness certainly isn’t 100%.
Last, this week (after all, my roundup posts are intended to be a “best of” not enough reading for the whole afternoon) is Johnathan Chevreau’s article
The case for managed money: DC and 401(k) pensions roared back in 2009, Vanguard finds. I like John’s writing, he’s one of my regular reads, but in this case, I’m not sure I agree with his conclusion. Vanguard stated “at the end of 2009, the average account balance was US$69,000, up 23% from 2008.” That’s an increase from a starting point of about $56,000. Given, the 2009 deposit limit was $16,500 ($22,000 if 50 or older) and there were still companies matching deposits, it’s tough to parse out the growth from deposits vs growth from market return. John referenced a Vanguard report that ran 84 pages. I’ll be studying it for a future article of my own.
Have a great week.
Joe
I don’t know if stories like this get national press or not, but I do know that my tax crush Kay Bell broke it on her blog Don’t Mess With Taxes. Her three-parter started with Sen John Kerry avoids “sails” tax, was updated a couple days later If Mass. asks, Kerry will pay yacht tax, and concluded with Kerry to pay “sails” tax on yacht.
Add Sen Kerry to the list of people I don’t get, right after Elliot Spitzer and Charlie Rangel.
Joe