On an income of 300-400K, sure 6k (or 12k) will be small potatoes.

But gee... when you're retired, you (or your children when inherited) will be so happy to benefit from having a tax-free bucket.

How do you file your tax returns currently?

Once you've done it once, filing the proper forms is a trivial task thanks to tax software.

> I have a 401k from a previous job in the USA that is being shut down.

Depending on what you exactly mean by "shut down," it's conceivable the 401k will simply be rolled into a new 401k. Or a Traditional/Rollover IRA at the same custodian.

Have you clarified what would happen if you took no action?

While there are exceptions out there....

You're a commodity.

You are replaceable.

I will hire the one who is willing to do the work the cheapest.

I have no need for loyalty.

I would just replace you with the next person who is willing to work for less pay.

I will tell you that loyalty is important. I will tell you that you are family. I will tell you that you are important.

This is all to keep your wages stagnant and discourage you from seeking other opportunities.

I have multiple debit cards because my financial institutions send them to me. Just because I'm sent something doesn't mean I have to use it.

I solely use credit for purchases as the fraud protections are vastly superior.

I solely use Fidelity/Schwab for ATM access as I can rest assured that any ATM fee will be reimbursed.

Have you already hit the max or on track to hit the max on all of your available tax advantaged space?

Have you read the Prime Directive? Have you seen the Flow Chart?

• https://www.reddit.com//r/personalfinance/wiki/commontopics

Your response to another commenter is concerning...

> But I'm not sure I understand it correctly. When I read this I think "Well the money isn't going to sit for 100 years. And a 6% interest gain after 100 years seems pretty bad." I don't know much about investing, am I reading this wrong?

The misunderstanding is not 6% appreciation in TOTAL across the 100 years.

It's an expected 5-10% (about 6-7% on average) per year over multiple years. As in, you might be up/down from year to year, but over the long term (ie decades), you expect to have an annual rate of return ~7%.

If this was misunderstood, I want to make sure you, yourself, have your own retirement well squared away. If this concept was holding you back from investing for your retirement, get your retirement well funded first, before you consider giving away money to your children.

Once you've taken care of yourself...

u/billthecatt has arguably the best answer to this question linked and pasted below:

• https://reddit.com/r/personalfinance/comments/ub71n3/how_to_set_up_an_investment_account_for_my_kid/i629d25

Typical kid options:

529 - Great for college/education, but not all kids go to college/private schools, etc. More Details here: https://old.reddit.com/r/personalfinance/comments/mq0rjb/information_about_college_529_savings_plans/

UTMA (Custodial) - Invest on behalf of the child, Pros - lower taxes (assuming amounts don't get too high, see below), fewer restrictions on usage than 529. Cons - Is the child's money, so no takebacks. Minor takes full control at the age of termination (varies by state, typically 18 to 21). Also, will reduce/impact financial aid for college. You should tax gain harvest this type of account (realize gains periodically, while in the 0% tax bracket).

IRA (Roth/Traditional-Custodial) - Cons: Requires earned income, which most minors don't have or have much of.

Normal investment account in your name - Cons: Probably higher taxes than UTMA, Pros - you keep control

HYSA - Pros: Won't "lose" nominal value, low risk Cons: May lose out to inflation.

CD - Pros: Like HYSA, but with guaranteed returns over investment period. Cons: May lose out to inflation.

I-Bonds: Currently high-yielding bonds that can be purchased in accounts for minors: (up to $10k/year; interest changes every 6 months) /r/personalfinance/comments/qprqpy/ibond_questions_answered/

The first 4 options (529, UTMA, IRA, investment account) are account types that allow for investing based on your time horizon. If your child is young, a more aggressive investment mix may make sense for you (Stock ETFs/funds), and you may want to shift to a more conservative mix over time, depending on your goals for your child(ren).

More information:

UTMA Kiddie Tax Info: https://www.marketwatch.com/story/the-kiddie-tax-is-getting-easier-and-maybe-cheaper-under-the-new-tax-law-2018-05-24

UTMA Taxes: In general, in 2020 the first $1,100 worth of a child's unearned income is tax-free. The next $1,100 is taxed at the child's income tax rate for 2020. Anything above $2,200, however, is taxed at the marginal tax rate of the parent(s), which usually is higher than the child's rate.

Overfunding a 529 isn't so bad: /r/financialindependence/comments/hqexle/oversaving_in_a_529_is_a_much_smaller_problem/

Would you believe me if I told you that...

• Amount subject to tax = Gains = Sold price - fees - acquisition price

> This is for all states not just WV right?

Correct.

Also note that while it is penalty-free, it is not tax-free.

You should expect to pay taxation at ordinary income rates on the gains.

It's no safer than ACH.

The only difference is fees and time.

> their concern is that with 30-year Term if they end up living past that point all of it would go to waste and they won't be able to give anything to their adult(20-30s) children (us).

This is exactly how the salespeople sell these things.

The fact is that you need to see the other side.

This is:

• Term Life with cheaper premiums
• Taking the savings and investing that (following the principles as outlined in the PF Wiki).

Once you perform this assessment, you will very quickly realize the impact of fees/commissions/premiums.

You will very quickly realize that IF you make it to the 30 year mark, you will have MORE money than if you went down the Permanent life pathway. Even though that money to Term Life went to "waste," you're still richer.

The other thing to realize is that Insurance is always going to be a "waste."

Why?

Because Insurance is meant to protect you in case a "bad thing" happens. You don't want any "bad thing" to happen. But you acknowledge that sometimes "bad things" happen and you want to prevent yourself from going bankrupt from those things.

For example... car insurance might be considered a "waste" if you never get in a car accident. You're paying all this money. If you never get in a car accident, then you've paid all this money for nothing.

So what's the smart thing to do?

Go with whoever provides reasonable amount of car insurance for your needs at the cheapest price.

Similarly, you buy a reasonable amount of life insurance NOT for the purposes of leaving an inheritance (this is a sales tactic, this is generally a very inefficient use of life insurance). You buy it because someone depends on your income. If you died, this person would have a very hard time surviving. Usually this is young children.

So you buy a reasonable amount of life insurance for your needs at the cheapest price.

This is what Term is for.

You SHOULD outlive the policy.

By the time the policy ends, you should either:

• Have accumulated enough assets so that your dependent can live even if you died.
• Your dependent has their own assets and no longer depends on your income to survive.

This requires a fundamental unwinding of all the sales tactics that your family has already been convinced of. It requires an understanding that it's okay to pay insurance and get nothing out of it. It means you've actually won the game.

• Health insurance: Never use it? Great! You've won the genetic lottery
• Car insurance: Never use it? Awesome! I hope you never have to.
• Disability insurance: Never use it? Nice! Being disabled is not fun.
• Umbrella insurance: Never use it? Strong work! Avoiding random liabilities!
• Life insurance: Never use it? Amazing! It means you're not DEAD.

Pretty much all forms of Permanent (Whole, Universal, Variable, etc) life insurance are terrible for 99.9% of Americans.

It tries to do two things:

• Insurance on a life
• Investing

Unfortunately it does both very very very poorly.

• It is a very inefficient path for investing.
• It is an expensive life insurance.

The two combined make them a poor choice.

It is better to accomplish the two goals with separate products:

• Life insurance: Term.
• Investing: Follow the PF Wiki Prime Directive.

The Wiki has an excellent section for those looking for a more in-depth explanation on life insurance.

• https://www.reddit.com/r/personalfinance/wiki/insurance/

If you're planning on having a family/children, make sure to buy a Term Life insurance policy (not Permanent/Whole/Universal/Variable/etc) before you start flying...