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Financial planning for college and beyond

Dear Mr. Priest: I already have a 529 College Plan set up for my daughter to get the tax benefits. Is there something I can set up to help her get started on the right track for retirement? I own a small business, and it’s hard for me to save at this stage of my life. With that in mind, I’d like to get her started as early as possible so she doesn’t run into the same problems that I have.

– Jessica, Vail



Dear Jessica: There is actually a great way for you to help her get started for retirement. It’s called the Minor Roth IRA. The Minor Roth IRA is similar to the Roth IRA for adults with a few exceptions, so let’s cover the basics. First of all, your daughter must have earned income to qualify. Earned income could include payment for anything from babysitting to a typical job. Here’s an interesting twist: Since you are self-employed, you could put her to work filing, doing office tasks or anything else that might benefit to your business. You’d be hard-pressed to not find something a child of any age could do around the office to benefit your business in some way. With her earned income from working, she qualifies to contribute up to $3,000 per year to a Minor Roth IRA. You or your husband must act as the custodian on this account until she reaches 18 since, generally, minors are prohibited from entering a legal contract on their own. Additionally, she cannot contribute to the Minor Roth IRA after she reaches the age 18. The account compounds year after year, however, until she is eligible to access the growth that has accumulated tax-free in her account during or after the year she turns 59.5. In the meantime, she actually can access the principal without penalty or taxes. Although withdrawals may come in handy for a new car or her first home, you may want to consider their negative impact during her retirement years.



Where to go to open

a Minor Roth IRA

Although they are not available through all mutual fund companies, there are numerous fund families that do allow Minor Roth IRA accounts. Here comes the fun part of opening a Minor Roth IRA for your child: Let’s assume that, by the time your daughter turns 10, she has accumulated $10,000 in her account. If that account earns an average annual return of 10 percent per year, she will have accumulated more than $1.8 million at age 65. That’s if she never adds another penny. If you have taught her well and she adds an additional $100 per month until retirement (under the same assumptions and using an adult Roth IRA at age 18 and beyond), she will have accumulated in excess of $4,300,000 for her retirement. With this philosophy and proper planning, young adults can enter careers of their choice because they are passionate about it – not because they feel they need to make a bundle of money to retire comfortably. Start teaching this to your daughter now, and you may be making a difference for generations to come.

Happy planning.

Bob Priest, MBA, CFP, is an Independent Certified Financial Planner and Registered Investment Advisor serving clients locally and nationally. He can be reached at (877) Bob-Priest or visit his Web site at

http://www.BobPriestFinancial.com. All opinions herein are that of the author and not that of the Summit Daily News or its staff. Bob Priest, Registered Principal offering securities through SunAmerica Securities, Inc., member NASD/SIPC. Submit your financial questions to

Bob@FinancialCompanies.com.


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