Go an interesting email from a Rick Rodgers, certified financial planner and author of “The New Three-Legged Stool: A Tax Efficient Approach To Retirement Planning.” the other day. He shot over a few pieces of advice when it comes to planning for your kids’ retirement and I thought it was pretty good. (Though it would be best to teach THEM about financial education early on too, while at the same time helping them)
Here’s five suggestions of his:
- Start at 16 – Just $5,000 contributed to a Roth IRA each year for 5 years starting at age 16 could be worth more than a million by the time the reach age 65. In a Roth IRA all that growth would be tax-free when withdrawn.
- Fun or Fund? – Take half of what you have been spending on gifts (toys, games, etc.) and invest it in a mutual fund for your child.
- Birthday Booster — Encourage friends and relatives to contribute to the mutual fund account you’ve started instead of buying gifts for birthdays and holidays.
- Every Little Bit Helps – Contributing small amounts on a regular basis is a better strategy than waiting to accumulate a larger sum. Get in the habit of saving something regularly.
- Use the Refund – Let the government help. Currently the child tax credit is $1,000 per child until they reach age 17. Discipline yourself to save the credit when it is returned to you as a refund.
Rick reminds us that it doesn’t take a lot to give your kids long term security, and adds, “The magic of compounded interest can do more of the heavy lifting as long as you start early and contribute often.” Amen to that!