Why would I want to contribute to an IRA as a gift, and how would I go about doing that?
If you want to help a friend or family member, such as a child or grandchild, who may not be able to save for retirement, you can gift to that person the amount needed so that he or she can contribute to an IRA each year. The friend or family member can contribute to an IRA each year as long as he or she has earned income at least equal to the gifted amount.
For example, you could make a gift/contribution for a teenager with summer employment, a college student working part-time, a young adult just entering the full-time workforce who is trying to pay off student loans, or more established adults who are employed but have not been able to adequately save for their retirement.
Under the federal gift rules, you can gift up to $14,000 in 2013 to any person without reporting the gift amount to the Internal Revenue Service, but the IRA contribution rules limit you to $5,500 per person ($6,500 if age 50 or over).
This IRA gift provides you with a way to teach the individual about investing and to discuss their comfort level with dealing with market fluctuations and the merits of diversifying the IRA investment portfolio in different asset classes, such as stocks, bonds and real estate. This educational process is especially important if this person will eventually serve as your agent under a Durable Power of Attorney, or if this person will inherit a larger, more substantial amount, upon your death.
As an added bonus, Traditional IRAs and Roth IRAs have broad creditor protection under federal and most state laws, which can be beneficial to a younger loved one who has professional liability concerns, a bad marriage or other creditor issues.
Best of all, you can open a low-cost TIAA-CREF Traditional IRA or Roth IRA product for a family member, which then qualifies the family member to receive our advice services at no additional cost.
The tax information herein is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties. Examples included herein, if any, are hypothetical and for illustrative purposes only. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
Advisory services provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser. TIAA-CREF Individual & Institutional Services®, LLC also distributes securities and provides additional brokerage services in its capacity as a registered broker/dealer, member FINRA. TIAA-CREF Trust Company, FSB provides investment management and trust services.
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