While on the subject of Xmas presents....Roth IRA?

[Dueller]

I have a 17 y.o. step son who is fascinated with investing, the stock market etc. What do you think about setting him up with a trading account in a Roth IRA with say an initial sum of $500 in a money market account so he can dabble, put his own money in?

He works so the IRA wouldn't be a problem...my thoughts are he couldn't take the money out without substantial penalties which would be a deterrent, it would grow tax free, good learning experience, not really enuff to fall prey to day trading dreams, etc...it would be a unique present and could teach a lot more than the latest computer game or mp3 player.

Whacha think?...and has anybody had any experience with sharebuilder.com for the small investor?

[Nathans_Dad]

Good idea!! The money is protected until retirement age (55 1/2 as I recall) and if you choose his investments with him you can make sure he doesn't go off on penny stock fantasies and lose it all.

Really great idea.

[slakjaw]

Originally posted by Nathans_Dad
Good idea!! The money is protected until retirement age (55 1/2 as I recall) and if you choose his investments with him you can make sure he doesn't go off on penny stock fantasies and lose it all.

Really great idea.

+1

[carnutzzz]

I believe you can actually remove any money earned in the Roth penalty free. But your initial investment must remain.

Here's something for the kids-

Assume 8% ROI.

Deposit $4k per year between the ages of 15-22. Never save another penny.

Retire with nearly a cool mil. Compounding interest proves there is a God.

[Bill Verburg]

Originally posted by carnutzzz
I believe you can actually remove any money earned in the Roth penalty free. But your initial investment must remain.

Here's something for the kids-

Assume 8% ROI.

Deposit $4k per year between the ages of 15-22. Never save another penny.

Retire with nearly a cool mil. Compounding interest proves there is a God.

Just the opposite, the earnings have to stay till age 59 1/2, the principal can be withdrawn w/o penalty at any time(just don't tell the kid about that). You can only deposit earned income, kid has to have a job, on the books

Everyone should do this for their kids!!

[MysticLlama]

Sharebuilder rocks as far as I'm concerned. I've been using them for several months now for a couple of accounts and have had 0 problems.

It does help that my friend is the Marketing Manager there and I can send any bugs I find through him and they get fixed right up. (It's only been a couple of small things like confusing links though, nothing functionally wrong.)

One of the things that I like is that you can do a purchase on Tuesdays (as long as you do the setup on Monday) for $4. Sells are about $15 I think. The thing is, it makes it not so painful to put money in, but discourages trading in and out with small dollar amounts.

I'd suggest doing the $12/mo. plan. It allows you 6 free buy transactions, $2 buys after that, but more importantly adds the gain/loss tracker tool, which is really handy at pointing out how even small fees can kill your return when you're not trading large sums in and out.

I might eventually want to switch to something that has $7-8 trades to be more active, but right now I'm mostly just adding, and this is the most inexpensive way to do that.

[Bill Verburg]

Forgot to add, for the unsophisticated, younger investor I would put it in a low cost S&P 500 Index, Vanguard or Fidelity. The minimums might be an issue though.

Fact $500 invested in the S&P 500 index(exclusive of fees)on 1/1/75 was worth $9090 on 12/31/05. avg 10.91%/yr

Edit to add, this does not include dividends either