From Kiplinger · · 1m 50s
Launch Fund for Kids or Grandkids
How to build a launch fund for your kids or grandkids without risking your own financial security.
In brief
How to build a launch fund for your kids or grandkids without risking your own financial security. Parents and grandparents can create a launch fund for young adults to supplement post-college income or home purchases while prioritizing their own retirement savings. Originally reported by Kiplinger.
Why a launch fund matters
Many parents and grandparents set up college funds for children or grandkids given today's high cost of higher education.
Current job market challenges
Today's sluggish entry-level job market means college funding alone may not ensure financial stability for young adults.
Prioritize your own financial needs
Experts stress securing your retirement before funding younger heirs to avoid stretching your resources.
“There can be a strong emotional pull to be looked at as the provider, but it is important to pay yourself first.”
Secure retirement first
Tyler End, CFP, CEO of Retirable, says you must have sufficient retirement savings before funding the next generation.
“There can be a strong emotional pull to be looked at as the provider, but it is important to pay yourself first.”
Beth Stenz's advice
Beth Stenz, CFP at Edward Jones, recommends securing your retirement before funding younger heirs.
“I would start with one important rule, secure your own retirement before funding the next generation.”
Flexibility in launch funds
A launch fund provides flexibility for post-college expenses like job market challenges or home purchases.
Account options
Taxable brokerage accounts offer flexibility for launch funds without education-only restrictions.
529 plans for launch funds
529 plans allow tax benefits for education expenses and can be used for launch funds with strategic rollovers.
“I particularly like that the account owner retains control rather than simply handing the assets to the child.”
Roth IRA rollover
529 plans allow beneficiaries to roll over up to $35,000 into a Roth IRA over their lifetime.
Custodial accounts
Custodial accounts transfer ownership to children at a set age, but may affect college financial aid.
Trump accounts
Trump accounts let grandparents contribute up to $5,000 per year per child with tax-deferred growth until age 18.
Share plans with family
Open communication with family helps ensure launch funds align with young adults' needs.
“Don't hesitate to open communication with your family.”
The bottom line
Parents and grandparents can create a launch fund for young adults to supplement post-college income or home purchases while prioritizing their own retirement savings.
