If you have children or grandchildren of working age, then you should seriously consider contributing to their Roth IRA. Making a gift contribution to their Roth IRA is a perfect way to pass on wealth and to make sure that they won't blow the money by having it sit in their checking account.
The annual gift tax exclusion for 2013 is now up to $14,000, meaning that you can give away up to $14,000 without anybody having to pay a tax on that gift. The annual contribution limits for a Roth IRA is $5,500. The catch is that you cannot contribute more than the amount of money that they made in any calendar year. So if they only make $4,000 in 2013 you can only contribute $4,000 to their Roth, not the max of $5,500.
Since the children are so young when this happens compounding interest has the ability to be leveraged to maximum effect. If you can somehow convince the future generations to work summer jobs from 16 until they get out of college at 22 and are able to contribute the maximum of $5,500 each year, then by the time they retire at 65 they will have accumulated $721,724 (assumes 7% ROI) just from these initial 6 contributions by you. All of which is tax free!
Note: setup a Roth IRA and not a traditional IRA. The tax advantages of a regular IRA when earnings are so small will be very little to nonexistent. Also, this should only happen after you are confident in your own retirement. Trying to get this money back if you need it later could prove to be impossible or at best very expensive.
The annual gift tax exclusion for 2013 is now up to $14,000, meaning that you can give away up to $14,000 without anybody having to pay a tax on that gift. The annual contribution limits for a Roth IRA is $5,500. The catch is that you cannot contribute more than the amount of money that they made in any calendar year. So if they only make $4,000 in 2013 you can only contribute $4,000 to their Roth, not the max of $5,500.
Since the children are so young when this happens compounding interest has the ability to be leveraged to maximum effect. If you can somehow convince the future generations to work summer jobs from 16 until they get out of college at 22 and are able to contribute the maximum of $5,500 each year, then by the time they retire at 65 they will have accumulated $721,724 (assumes 7% ROI) just from these initial 6 contributions by you. All of which is tax free!
Note: setup a Roth IRA and not a traditional IRA. The tax advantages of a regular IRA when earnings are so small will be very little to nonexistent. Also, this should only happen after you are confident in your own retirement. Trying to get this money back if you need it later could prove to be impossible or at best very expensive.
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