Grandkids might seem like a distant consideration when it comes to retirement planning. But especially in uncertain economic times, helping to protect the children of your children can make good financial sense.
Free Retirement Calculator: When Can You Retire? — Click Here to Find Out
One way of providing for grandchildren as you prepare for your retirement is to help them prepare for theirs. Grandparent can establish individual retirement accounts (IRAs) on behalf of a grandchildren and let them accumulate wealth over time.
Another measure is to help a grandchild pay for college by starting a federally recognized 529 plan, "one of the best ways to help a child financially while limiting your own tax liability,"
Sam Davis of THB Global Asset Management told Investopedia.
There are some potential pitfalls to giving grandchildren (or any child) money for college. For one, the child might decide to skip college.
And under some circumstances, a child who plans to attend but is also a named beneficiary of family money could become ineligible for college financial aid,
according to the American Grandparents Association.
How Soon Can You Retire? Free Test Shows You When — Click Here
But wealth managers generally see 529 accounts as win-win.
"Besides the tax benefits, they're enjoying a nice, warm feeling because they're able to help out," Brendan Kelly, president of
Somerset Capital Advisers in Pennsylvania, told Financial Planning.
Grandparents can also gift up to $14,000 in cash to each grandchild, and those gifts do not count toward the lifetime federal estate tax exemption. Likewise, any money in any amount that is expressly designated for a granchild's educational or medical needs is excluded from the estate tax exemption total.
Beyond retirement planning, grandchildren as well as children may also be considered as beneficiaries of trusts and as heirs in estate planning.
An Extremely Simple Way to Determine If You're Ready to Retire — Find Out Now
Related Stories:
© 2025 Newsmax. All rights reserved.