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$6K in my son's Roth - What would you do?

Diane Kennedy

Bronze Contributor
Aug 31, 2007
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49
I could use some advice from the stock trader type people on board.

Our 16 y.o. son has approx $6K in a Roth account. We know real estate and investing in other people's real estate deal, but $6K isn't enough to do that with. (Deals we do typically need $25K or $50K buy-in)

So, my husband and I were talking this morning about parking it in some kind of fund. We don't want to be active in it at all. Ultimate plan is to contribute at max each year until it's big enough to put into one of our real estate deals. And he can't touch it until he's 59 1/2.

Thots?
 

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AJGlobal

Contributor
Read Millionaire Fastlane
Aug 14, 2007
175
57
39
Phoenix, AZ
I could use some advice from the stock trader type people on board.

Our 16 y.o. son has approx $6K in a Roth account. We know real estate and investing in other people's real estate deal, but $6K isn't enough to do that with. (Deals we do typically need $25K or $50K buy-in)

So, my husband and I were talking this morning about parking it in some kind of fund. We don't want to be active in it at all. Ultimate plan is to contribute at max each year until it's big enough to put into one of our real estate deals. And he can't touch it until he's 59 1/2.

Thots?
I'm not much of a trader but I have a similiar account set up for my son who is 8. I started investing into a franklin tempelton fund (FCIIX) that allows me to put a large amount of money per year into his account. I started it when he was about 2 or 3 years old and at that time you could only put $2k a year in, now that amount has gone up to around $6k a year I believe. I would have to ask my financial advisor to be sure but it automatically comes out of my checking account each month.

The deal with this is that I pay tax on the money now but when he turns 18 whatever is in the account and whatever it has made in interest is tax free if he uses it for school or he can roll into something else and still not pay tax. He currently has close to $15k in the account and $4k of it has been money made in interest. I am not involved in the account at all except to see what its doing. Other than that I just let it do its thing. I believe you can also leave the money there until he is 21 if you choose to as long as he uses it for school.

I'm sure some of the other guys in here would have more info or what exactly the type of account it is but I thought I just share my experience with the fund and how it has worked for us. You can also choose which fund you want to invest it in. You can choose an agreesive fund or a less agreesive fund. I've had his in the most aggressive fund seeing that I started it when he was so young. We have another 10 to 12 years before he needs to touch it so he should have a good chunk of change to go to school with or roll into another investment when the time comes.
 

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Sep 20, 2007
349
71
59
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Kansas
Can you make that ROTH a 15%-20% partner in the type of deal you are wanting to do, or is the self-directed admin fee for that amount not worth it?

I don't have the answer for your situation because my investment style is much more active than what you are looking for. The only funds that I am invested in are in my 401(k), because of the limited investment options I am offered in it. Actually most of that is in ETFs instead of mutual funds.

I just had to chime in becuase I realized this is the same question everyone faces at some point in their life. The issue is that 6k isn't enough for you to do the type of investing with the type of returns that you really want to do. I know that the 6k limit in your case is becuse of the type of account that the money is in, but a lot of people have that same problem becuase that is all the money they have at their disposal period. Everyone has to start with 6k and turn it into enough money to do the investing they want to do.
 
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OP
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Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
209
49
Hi Edge:

The one investment I'm thinking of (Shopoff Group REIT - I'm on the board, so have a little LEGAL inside info) won't let us split up ownership like that.

I was thinking about what you said about other people in the same boat. It's funny but I have solutions for them - get more active on the investments either through business or real estate. (Three years ago I'd have said real estate and today I'd say business) It's the passive investing that's more than a CD that I don't know about.

AJGlobal - Thank you for your suggestion. I'll look into Franklin Templeton.
 

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Sep 20, 2007
349
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Kansas
It's the passive investing that's more than a CD that I don't know about.
quote]

Wife has some retirement money in WWNPX, looks like it could be the type of passive but greater than CD fund you are looking for. The prospecuts shows a high exposure to the financials, but it has still held up well during the fall of the financials. Maybe they got out of most of their financial holdings prior to the last prospectus update.
 

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
good topic.... for my 3 month old son, I am buying SeaDrill with all $1500 he has. could be the smartest thing I ever did. But then again....

side note: he got more money when he was born than my daughter did when she was born... gender bias?
 

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Diane,
I am assuming that you are looking at a time frame of 4-5 years before you can get the 25K for a real estate deal. I am also assuming that you aren't interested in losing much money so don't want to take a lot of risk. You may want to consider a low cost balanced fund or world index fund. If you think that equities are in for a rough period, cash may end up being one of the better investments over the next several years.
 

MrPink

Contributor
Feb 26, 2008
443
29
35
Toledo, OH
Diane,
I am assuming that you are looking at a time frame of 4-5 years before you can get the 25K for a real estate deal. I am also assuming that you aren't interested in losing much money so don't want to take a lot of risk. You may want to consider a low cost balanced fund or world index fund. If you think that equities are in for a rough period, cash may end up being one of the better investments over the next several years.
I would not recommend a world index fund for this time period.

I can understand how you get the first 10k out for a real estate deal, but not the remaining 15k without a 10 % penalty.
 

rockjon

New Contributor
Aug 19, 2008
7
1
8
Mr. Pink,

I think Diane wants to use her son's Roth IRA eventually for real estate but it's not large enough to do that yet. The 59 1/2 part is just when her son can withdraw the money without paying the additional 10% early withdrawal penalty.
 

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