The Wall Street Journal has an interesting article on why a parent or a grand parent would want to contribute to a child’s retirement plan right after they got out of college. This is a technique not often mentioned that has a fair amount of merit.
Using IRA’s, Roth IRA’s and 401K accounts can maximize the contributions early which grow to a large amount at retirement since they were contributed early. It helps your child get a head start on a financially secure retirement.
From a practical perspective, you would gift your child and amount equal or less than the current gift amount of $14,000 and it would go right into the retirement account. The growth of the funds can be almost 40 times the original contribution over 50 years.
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