Tuesday, March 04, 2008

Should I Ask?

Here's a question that's been much on my mind lately: should I ask my parents to write me a check so I can max out my Roth IRA?

Before you start in about my sense of entitlement, consider two things:

1) They did so last year, and expressed their wish to do so again this year.
2) I live well within my own means--I do not need this money, but wouldn't be able to save this much on my own.

As commenters have mentioned, this is really more a "wealth transfer" scenario (i.e. by funneling money into my Roth in small increments, my parents are giving me money that will turn into lots of money without anyone having to pay taxes on it) than a "financial support" scenario. Nevertheless, my parents are making a lot of important financial decisions now, in the wake of my dad's retirement, and I don't want to ask them for something they're unable to give. Then again, if they'd said they wanted to do this, is it really unreasonable to say, "Hey, guys, did you still want to do this?" Or do I take their silence as their answer?

(I really don't like asking my parents for money, in case you haven't noticed.)

25 comments:

stackingpennies said...

At what point did they give it to you last year? Maybe you can procrastinate asking and it will resolve itself?

Personally, I'd bring it up as long as I was quite confident they could afford it. But this is coming from a girl who actually has never been in a position to ask, so it may be harder than I imagine.

Entitlement, wealth transfer... so what? If I have wealth "when I grow up", of course I'd transfer it to those I love. It is perfectly fine tax wise, as long as it is less than 12k

MEG said...

My parents promise things like that which they fully intend to follow through with (like reimbursing me for a flight home), but they often won't remember to bring it up themselves later. I hate reminding them, too; I totally know how you feel.

I would approach it without asking directly by bringing up the subject and waiting to see if they offer. You could say something like "I've been going over my budget and I think this year I'll be able to contribute $500 myself to my Roth IRA!" Then pause for a response.

If they/you still haven't brought it up by your birthday - or Christmas -say "I've managed to save X amount in my Roth IRA this year, but I'd really like to max it out. Would you consider making X contribution as my Christmas/birthday present?"

They'll probably jump in and offer to max it out for you, especially given your responsible, anti-consumerist gift request.

mOOm said...

Meg's suggestion sounds good. Somehow casually mention your saving efforts. Yesterday I had a similar conversation with my Mom about the wedding present she told us she is giving us....

Anonymous said...

If they've offered there is absolutely no reason why you shouldn't bring it up. I would just be straight forward and ask (whether I was worried about them being able to afford it or not) if they were still wanting/able to - I always want to make sure I'm not letting myself even get close to feeling entitled by reminding myself through asking that if my parents want to do something wonderful like that for me, then it is a bonus - not a given.

Mal said...

You should totally ask - but if you don't feel comfortable with the direct approach (I don't blame you - I'm the same way) I'd go with Meg's advice.

her every cent counts said...

We're both in a similar situation. My father retired a few years ago and I'm 24 and working enough where I can afford to contribute to my Roth IRA on my own. The last time I asked my parents for money was to pay an old medical bill that never got taken care of, which should have been paid by my parents back when they were still paying for my healthcare plan. In any case, I personally don't want to ask my parents to max out my Roth IRA for me. But I also have the money to do it on my own if I save properly. If you're not making enough money to max out your Roth on your own, then it makes sense for them to give you the money to do it, esp if they plan on giving you this money one day anyway. It's better for both of you, taxwise, so there's no reason not to ask. If your parents have the funds then it makes sense.

Andrew Stevens said...

Well, I do believe that if you are given a choice between A) maintaining an emergency fund and B) funding your Roth, you should do B. (Obviously, you can and should do both if possible.) The reason I suggest this is because missing your Roth is a lost opportunity which you can't get back. But losing your emergency fund isn't. If you sink it into a Roth and you end up having to take it out, you can do so tax and penalty-free (contributions only, not earnings). And you are in no worse a position than if you had never contributed to your Roth in the first place.

The only downside of this idea is if it so happens both A) you need to tap the Roth as an emergency fund before you've restocked your fund and B) your Roth has lost money in that time, forcing you to sell at a loss. Obviously this can happen, but it does require a couple of bad things to happen at once.

So, given the state of your "freedom fund," I don't believe you're even stuck with your parents to fund your Roth. I would do so with your own money. If your parents offer to give you money to stock back up your emergency fund, all the better.

Elizabeth said...

I was going to say that you could probably find the money to max out your Roth on your own, but then I saw that you're already maxing out your 401(k), which is a much bigger chunk of money. Congrats to you on that! I agree with the above posters...go ahead and ask (with subtlety).

Alison said...

It depends on how much more you need to max out your IRA. (Did you state that somewhere? if so, I didn't see it...) If it's less than $1,000 to max out your IRA, I don't think it would be too burdensome, especially seeing that they've done it in the past. You could always pay it back incrementally over the course of this year. Let me know what you decide!

Living Almost Large said...

Um, I don't know if I could do it. Even if my parents offered. I guess too much of it being an adult thing.

But if you really want to.

mOOm said...

Andrew: As I understand it English Major's "freedom fund" isn't for emergencies, rather it'll probably get used when she goes to grad school. So I'd expect the money to get used, rather than maybe get used. Well, when I was in grad school I borrowed money from my Dad after using up my savings and maxing out my credit cards. Later on after I had begun to pay it back he changed the loan to a gift.

Andrew Stevens said...

I have to say that I think maxing your Roth (if you qualify) is important enough that most other goals should take a backseat. Especially when you're as young as English Major. The fund can be restocked. If you miss the deadline for the Roth, that year's opportunity is gone forever.

Megan said...

Meg, I was beginning to think we were the same person. My parents do the same things with flights! But I don't bring it up either, because I don't need them to reimburse me, it would just be nice.

In terms of Roth IRA, I also agree with Meg's suggestion. Bring it up casually, and then don't say anything, and then if they haven't done it by Christmas, see if it can be a Christmas gift.

Anonymous said...

Sorry, but you sound "entitled"...
If it is really something they want to do, they'll remember on their own.

PiggyBankBlues said...

anonymous- since her parents expressed their wish to do so again this year, it's really not an issue of entitlement.

EM- i say YES, because they expressed this wish, by all means go for it and do NOT feel badly about it. i don't know if you talk about money with your folks, but you might want to open up the conversation to your larger financial picture, so they can see your fiscal responsibility and appreciate how they are contributing to it.

English Major said...

Andrew, Moom is right that my Freedom Fund is less a conventional "emergency fund" and more of a stash of money that I want to have available for spending to facilitate my hop to the next stage of my life (probably graduate school). I've considered the idea of filling the Roth from that bucket and ultimately decided against it.

I appreciate everyone's comments on this--and Meg, I think your suggestion is one I'd feel comfortable using, so thanks!
Elizabeth, I wish I was maxing out my 401(k), but I'm not--I'm contributing enough to earn the full employer match ($2,000, dollar-for-dollar) plus a little more. I wish I could max it out!

Mindy said...

I can certainly understand why you do/but don't want to ask! Money is a funny, touchy subject in many families. Plus, you do understand that at some point you should be financially independent. Another twist on the suggestions offered here (i.e.: birthday/Christmas present) would be to say, "I'm fine this year, thank you very much. But how about doing this when I'm in grad school and will have very little to contribute."

DogAteMyFinances said...

I wouldn't do it, just out of principle. I don't think it's my parents' responsibility to fund my retirement.

I did, however, accept a bit of help in college, and I probably would accept a bit of help with student loans.

Anonymous said...

My parents paid for every cent of my college education at a state school, and my dad also paid for most of my current car (up until this one, I drove beaters that I paid for myself). When I was laid off some years ago, he helped me then, too. I do feel guilty at times about accepting such things, but I think his view his, you can't take it with you. He always says, "Let me help while I still can and while I can see you enjoy it." I am sure your parents feel the same way.

Anonymous said...

I only have one parent and wouldn't remind her if she'd made such an offer. I would be very resistant to accepting a check if she sent it, too. It's nice when parents have kind and generous impulses, but I think that part of being an adult son or daughter (as opposed to being a child) involves thinking about what's best for one's parents, aside from what the parents are willing to do for us.

If I were in a situation like yours, the reason I wouldn't remind her would be because I think a lot of people, including my mother, underestimate how much they'll need as they get older. I'm concerned that she would hide it from us if she needed help in 10 or 15 or 20 years... I'd rather she keep her money for herself now to put off that day. She might have the generous impulse this year, but I don't think it would be the best thing for her in the long run.

calgirlfinance said...

I think Meg has a great suggestion. There's also the direct approach.

"Mom/Dad, you guys mentioned that you wanted to help me max out my Roth this year, but I don't want you to feel obligated to do so. Do you think you'll be able to help me out this year?"

It all depends on family dynamics! If it were my mom, that's the route I would go. If it were my in-laws, I would probably be more casual as Meg suggested.

mOOm said...

I agree with Anon 9:12. It all depends on the context of how wealthy a family is. If a family is wealthy enough that the parents stand no chance of running out of money and plan on leaving much of the wealth they have left to their children anyway, then why not transfer some of it earlier when they can see the good it does or provide guidance on how to use it? Of course it makes sense to transfer money to enable the children to succeed and not so much that they lose purpose in life. Another model is where a family thinks of the family's wealth rather than the wealth belonging to a specific person. Everyone can get help from that wealth pool and contribute to it to. This model is rare in the US outside the Asian community and upper class.

Single Ma said...

As a parent, I would be offended if I offered to fund my daughter's Roth and she didn't accept. However, I would think she was a brat if she asked me to do it because it would make me feel obligated. Even if I told her I wanted to do it, I don't need to be reminded. My memory isn't THAT bad.

When I'm funding my own Roth every year (or managing any important part of my finances), I know her Roth needs to be funded too. And I will fund it when I'm ready. But if I don't mention it, it wouldn't be because I forgot. It's most likely because I changed my mind.

Andrew Stevens said...

Single Ma, but I doubt English Major's parents fund IRAs anymore, though I could be wrong. Consequently, they don't have that automatic memory trigger that you'd have.

Jonathan said...

As long as they are financially set already, I don't see a problem with it.

You just don't get to be mad if they say no. :)