This time of year we often think of giving, and of gifting.
This year, instead of giving a traditional gift in a gift bag or box, consider giving what I call the "gift of experience" to those who are dearest to you. For example, a contribution to a Roth IRA to a working child or grandchild as a gift this year.
Following gifting rules and IRA contribution limits (earned W-2 income up to $5,500 for those younger than 50), you can gift part or all of an annual IRA contribution. Meet with your loved one, his or her parent if he or she is a child, and your financial advisor to make this as a "teachable" gifting moment. Share your wishes for their future and ask your advisor to share his or her wisdom regarding tax advantaged planning for the future.
If you have older loved ones (adult children) with traditional retirement assets of their own, you may want to consider gifting funds (following IRS gifting rules) to help them pay the tax on converting some of their own convertible retirement assets to a Roth IRA.
Your financial and tax advisors can talk you and your loved ones through the issues to consider. Make this an early "to-do" on your holiday planning list!
- Review the basics about Roth IRAs
- Learn more Roth conversion opportunities
- See my blog post "A different take on family gift giving" for additional financial planning gift ideas