Give the Gift of Retirement

Tired of scouring Nordstrom (NYSE: JWN  ) , Wal-Mart (NYSE: WMT  ) , Toys "R" Us (NYSE: TOY  ) , or (Nasdaq: AMZN  ) for the perfect gift that ends up on a shelf, then a closet, then on eBay (Nasdaq: EBAY  ) ? Scour no more! Instead, give the gift of shinier golden years. That's right -- give a gift certificate redeemable in retirement in the form of a fuller nest egg.

We're not talking about a literal gift certificate, of course. We're talking about contributing to the retirement savings of a loved one. Why? Because there's nothing like the gift of compounded growth, financial security, and a down payment on an RV years hence.

For example, contribute $100 to your 25-year-old daughter's IRA and she'd have almost $2,846 by the time she retires at age 67 (assuming 8% annual growth). If you're feeling very generous and contribute the maximum account limit of $3,000, the gift will have grown to $85,409 by the time your princess hangs up her work slippers. (If you are that generous to your offspring, have you considered adopting personal finance writers?)

How could you go about making a future retiree happy? Here are some possibilities, based on the beneficiary's profile:

  • Your responsible 25-year-old employed daughter: You can give the money directly to her and she can deposit it in the account of her choice: her job's retirement plan or an IRA.

  • Your 15-year-old newspaper-delivering son: As long as you can prove he has earned income (i.e., money from a job, not investments), you can contribute up to the amount he earned to an IRA. However, not every IRA provider allows accounts for minors, so you'll have to find one that does.

  • Your irresponsible spendthrift brother: If you want to ensure his financial security but also limit his access to the money, a trust might be the way to go. However, since a trust is a legal document requiring legal help, it can be complicated and pricey. Consider this option only if you plan to give away at least several thousand dollars.

Different brokerages have different options and rules when it comes to contributing to someone else's account. Visit our Broker Center for more information (including guidance on opening an account for a child). And if you'd like to talk to a professional about how to make other people richer, consider TMF Money Advisor.

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