r/investing • u/NewDragonfruit5698 • May 17 '24
Best option for Kids Future
Hi Everyone! I've searched and still haven't found a great answer as what to do for my kids. I'm in PA and have 2 kids under 3. The past few years they've been gifted a significant amount of money to the tune that I have $30k for each of them just sitting in savings accounts because I don't know the best option. I've looked at 529s and am interested, but do I put all of the money into that? Put some in that and some in CDs and some in a brokerage? Any advice would be appreciated. Thank you!!
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u/518nomad May 18 '24
The annual gift tax exclusion is $18,000 per recipient in 2024; $36,000 for a married couple filing jointly. So you can put up to that amount each year into each of their 529 Accounts with no concern about tax consequences. The 529 funds can later be used for college or trade school tuition and expenses. Any remaining funds can be rolled into their Roth IRA accounts down the road, up to a certain limit, which currently is $35K but likely will be increased by the time they need to worry about it.
Short version: 529 Accounts are a good way to go here.
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u/Pastor_Dale May 17 '24
A 529 is a great place to park it. Look for a state sponsored plan as it may offer a tax deduction for you. Funds grow tax deferred and will be tax free for qualified expenses. Left over funds can be then rolled over to a Roth IRA for each of your children. Check out the rules for 529 to Roth rollover.
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u/Worth_Mongoose9712 May 17 '24
529 would be good because that 30K should compound nicely over 15 years. Any money not used by their education can be rolled into a Roth IRA tax free.
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u/helpwithsong2024 May 17 '24
We did the NY State 529 and picked the growth fund (basically VUG). Should set them up nicely. Aim for about 1 year of tuition and it 'should' 4x in 18 years to cover the full cost.
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u/Successful_Taro8587 May 18 '24
For me I put my son's money in an UTMA. It's a protected brokerage account for minors. That way I can invest his money for the next 10 years until he is 18 and can take over the account. Look into it.