Correct. See my example above.

If you do $5,000 per year for 18 years and then convert it to Roth, then there is likely a tax bill that will be owed on $100k to $120k of profit at that time. Still would likely be a smart move, but the parents will need to pay that tax bill, as the kid won't be able to. Or I guess it could just be taken directly from the account.

mavsfan4ever said:

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If you do $5,000 per year for 18 years and then convert it to Roth, then there is likely a tax bill that will be owed on $100k to $120k of profit at that time. Still would likely be a smart move, but the parents will need to pay that tax bill, as the kid won't be able to. Or I guess it could just be taken directly from the account.

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Convert it slowly during down stock years to minimize capital gains OR LT capital gains would be $18k on 120k of profit. Still a no brainer to convert at 18-22. Pulled from acctount, 210k drops to 180k tax free (+penalty) with 40+ years to grow.

That being said 529 should be first priority for parents .

I assume you can transfer it to the other funds either immediately or after a short period of time. Is that the case from what you are seeing in the App?

Mmetag10 said:

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It is. That's why you convert it to Roth at 18 as soon as possible. Then all growth is tax free.

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Would be subject to kiddie tax if you convert to Roth at age 18. The key is to convert to Roth whenever the kid graduates college and starts working full time, or turns 24 years old, whichever comes first.

Agree. But pending how much you can get in there it may not have grown much. My kids are old enough they won't get much growth it's just a way to front load an Ira for them before they can working.

aggiez03 said:

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mavsfan4ever said:

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If you do $5,000 per year for 18 years and then convert it to Roth, then there is likely a tax bill that will be owed on $100k to $120k of profit at that time. Still would likely be a smart move, but the parents will need to pay that tax bill, as the kid won't be able to. Or I guess it could just be taken directly from the account.

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Convert it slowly during down stock years to minimize capital gains OR LT capital gains would be $18k on 120k of profit. Still a no brainer to convert at 18-22. Pulled from acctount, 210k drops to 180k tax free (+penalty) with 40+ years to grow.

That being said 529 should be first priority for parents .

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I think growth is taxed on withdrawal as ordinary income, not capital gains.

anybody know when the $250 Dell seed money gets contributed into accounts??

I think a side goal is to eliminate Social Security.

I'm fine with that (after i'm dead).

EnronAg said:

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anybody know when the $250 Dell seed money gets contributed into accounts??

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Ours got deposited today.

Took long enough. For a couple of months I thought I opened accounts for nothing.

mavsfan4ever said:

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If you do $5,000 per year for 18 years and then convert it to Roth, then there is likely a tax bill that will be owed on $100k to $120k of profit at that time. Still would likely be a smart move, but the parents will need to pay that tax bill, as the kid won't be able to. Or I guess it could just be taken directly from the account.

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You don't have to Roth convert the entire account at once. You would want to break it up over a few years to just fill up lower tax brackets while they are early in their career with low income years.

Not sure if already mentioned, but I see that companies are starting to/pledging to contribute into Trump accounts for their employees' kids. Somewhere between 50-100 have so far.... American Airlines, Goldman Sachs, IBM, SAP, VISA, etc.