Retirement fund for 6 yr old?
if i have a 6 yr 7 month old grandson, if i put 1000 in a fund for his retirement how much will he have at 62. What would happen to the money if something happen to him before he reached that age god forbid...
Public Comments
- If you want to save for him, you can create a trust fund or start a 529 (or similar) education plan. Contingency provisions can be included in those.
- I agree that your grandson may be better off with one of the college savings plans... If you would still rather do a retirement fund you have several things to consider. First, there is the gift tax since this is basically a gift from you. I do not know the exact law, so consult a tax professional, but i believe there is an annual exemption from him having to pay gift taxes on that. However, it may still classify as other income to be taxed at his tax rate. Second, consult an investmen professional. They will know rules on the above as well. To answer your question about how much, I did a quick simple interest calculation assuming you made each year's contribution at the beginning of the year using a 5% rate of return and came up with approximately $286,000. Remember, this is just a simple example calculation and may or may not reflect actual results so do not take my word as law. This also does not consider any loss in purchasing power due to inflation. As for what happens to a retirement fund if a person should pass: there usually is a beneficiary named in the plan other than the individual. Again, consult an investment professional. Find one you know and trust of have someone you know and trust recommend one to you.
- Depends on where you invest it. Mutual fund based on S&P 500 should net 8% per year, about 70,000 before taxes. This would be a taxable account. Cannot have a retirement account until he earns wages. Could then use the account to fund an IRA. If money is put in 529 plan, must be used for education or will pay penalty.
- a one time investment in a growth mutual fund would be worth about 70K -- if he should die it would go to the whom ever is listed a benefits!!!
- 1) At least $1,000,000.00 2) The money is transferred to his beneficiary.
