Advertisement
investing

Smart Financial Gifts for New Grads

Your new grad can stash up to $5,500 a year in a Roth as long as she earns that much from a job, and the money she uses to fund it can be your gift.

Question: My granddaughter is graduating from college, and I want to give her a generous gift that helps her build her financial future. Any ideas? --D.L., San Francisco

Answer: One suggestion is to give your granddaughter money to contribute to a Roth IRA. She can stash up to $5,500 a year in a Roth as long as she earns that much from a job, and the money she actually uses to fund the account can be a gift. Starting her on the savings habit early can make a huge difference in her future, says Mari Adam, a certified financial planner in Boca Raton, Fla., who is helping her adult children fund their Roths. If your granddaughter contributes $5,500 every year to a Roth starting at 22, then bumps up annual contributions to $6,500 at age 50, when she becomes eligible for catch-up contributions, then she’ll have $1.5 million in tax-free money by age 65 (assuming a return of 7% per year). She can withdraw contributions without taxes or penalties at any time if she needs the money for, say, a house down payment. All withdrawals, including earnings, are tax-free after age 59½. You can open a no-fee Roth at Schwab, TD Ameritrade or Fidelity.

Other ideas: Some grandparents (and parents) pay off a chunk of student loans. Or you could give her a “professional-start package,” says Adam—a lump sum she can use to cover a professional wardrobe, travel costs for job interviews or a car.

Advertisement

Most Popular

HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
2020 Stock Market Holidays and Bond Market Holidays
Markets

2020 Stock Market Holidays and Bond Market Holidays

Is the market open today? Take a look at which holidays the stock markets and bond markets take off in 2020.
July 1, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

For Financially Responsible Kids, Do NOT Do These 3 Things
family savings

For Financially Responsible Kids, Do NOT Do These 3 Things

The key to putting your kids on the right financial path can be boiled down into one sentence.
July 1, 2020
10 Tax Breaks for the Middle Class
tax deductions

10 Tax Breaks for the Middle Class

Tax breaks aren't just for the rich. There are plenty of them that are only available to middle- and low-income Americans.
June 30, 2020
Stars Align for Some Special Wealth Planning Opportunities
Roth IRAs

Stars Align for Some Special Wealth Planning Opportunities

A confluence of special tax, interest rate and market circumstances makes this a great time to execute income and wealth planning strategies that can …
June 26, 2020
Retirees Get Another Break with Expansion of RMD Waiver
required minimum distributions (RMDs)

Retirees Get Another Break with Expansion of RMD Waiver

The CARES Act cancelled "required minimum distributions" for 2020...and the IRS just expanded that relief to help more seniors and give more time to u…
June 24, 2020