Stupid money question....IRA

[Joel/ak]

Read about 529 investment plans for your kids.

I believe largely like a Roth IRA with post tax money invested, then later tax free for paying education expenses. If the kid doesn't go to college, there are ways they can still use the money.

As far as 401K vs IRA, they are largely similar, but one can take loans out of a 401K, while one can not take a loan against an IRA. Thus, there are benefits of rolling a 401K plan from one company to the next.

We got her a 529 when she was 2. At the time we paid 5k for it, nowadays the overall investment might buy a book or 2 but it's better than nothing I guess.

 

[ericm979]

If the 401k is still adminstered by a former employer or the company they hire to do that, it's often worth while to move it to an account that you control. Company adminstered 401ks often have additional fees an account with an investment company doesn't have. Sometimes those fees are in the 1% of total investments range, which is a big hit to the growth of your money. And often the investments are limited as well.

I always roll over my 401ks when I leave an employer. They go into an account that only has tax deferred money in it so as to not create a tax mess.

You can do this independently of naming a beneficiary or creating a trust. I think the trust is a better idea. You should probably talk to a professional about your goals in order to get a result that best matches them.

 

[MossRoad]

We got her a 529 when she was 2. At the time we paid 5k for it, nowadays the overall investment might buy a book or 2 but it's better than nothing I guess.

We put $25 per paycheck in our kids' 529 plans. They each had about $18K when they started college. By the time they finished their 4 years, that was 2 years of tuition to Purdue for each of them.

 

[dodge man]

You are allowed to gift your children so much per year. I think it $17k. The problem is you’d probably have an ugly tax bill and possible penalty doing that from a 401k. Like already said, a beneficiary is the best way.

 

[dmccarty]

You might want to consider converting the IRA to a ROTH IRA. There will be tax hit now, but the money will grow and be tax free when your daughter inherits the money. The RMD(Required Minimum Distributions) will likely cause tax issues in the future for a regular IRA/401K.