Ask Liz Weston

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Retirement Savings

Q&A: Can I open a Roth IRA for my minor grandchildren?

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Dear Liz: Where can I open a Roth IRA for my minor grandchildren?

Answer: Fidelity, Charles Schwab and Vanguard are among the large brokerages that offer custodial IRAs with no account minimums or fees.

Getting your grandkids started with saving for retirement is a great idea, but they’ll need to be earning their own money before you can contribute to an IRA or a Roth IRA for them. You can match whatever taxable income they receive from a job or self-employment up to the annual contribution limit, which is $7,500 in 2026. You’ll want to keep copies of the tax returns showing their income in case you’re ever audited.

If the minor doesn’t have taxable income, you could consider contributing to a Trump account. That requires filling out IRS Form 4547, but only certain people in a certain order are allowed to fill out the form. For example, if the children have a legal guardian, that person fills out the form. If there’s no legal guardian but the child has a parent, the parent fills out the form. If there is no parent, an adult sibling can fill out the form. Only if there is no legal guardian, parent, or adult sibling is a grandparent allowed to fill out the form. Once the account is established, up to $5,000 per year per child can be contributed.

That’s only the start of the many complicated requirements surrounding these accounts, so seek a tax pro’s advice before proceeding.

Keep in mind that with Trump accounts, the money is turned over to the child at 18, while custodial accounts must be turned over by the age of majority (typically either age 18 or 21, depending on the state). If you want to maintain control of the money for longer, consider funding a 529 college savings account. The contribution limits are much higher, the money is tax-free when used for qualified education expenses, and up to $35,000 can eventually be rolled over to a Roth IRA.

Q&A: Should I consider Roth conversions now or after I retire?

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Dear Liz: My husband and I both waited until age 70 to start Social Security. I will be 72 in September and am considering retirement. My husband is retired, 74, and taking required minimum distributions (RMDs). We have always tried to maximize contributions to our pre-tax retirement accounts and are now realizing the downside as we pay taxes on those mandatory withdrawals. Should I consider Roth conversions now or after I retire? I realize I will need to pay taxes on those conversions, but would it be best to do that when my income is lower? I am thinking about my kids and their future.

Answer: Late-in-life Roth conversions can be tricky. The amount you convert is removed from RMD calculations, lowering future tax bills. But the conversion is added to your current taxable income, potentially making more of your Social Security taxable and temporarily raising your Medicare premiums (thanks to income-related monthly adjustment amounts or IRMAA) in addition to generating a big tax bill.

Theoretically, a conversion could still make sense if your current tax rate is lower than the one you’ll have once you start required minimum distributions at 73. The case for conversion is strengthened if you want to pass this money to your kids. They likely would have to empty any inherited retirement account within 10 years, and they could be in their peak earning (and tax-paying) years when they do so. By converting now, you would in effect be paying the tax bill for them, perhaps at a lower rate than they might face, and allowing them to inherit the money tax-free.

A tax pro can help you with the calculations so you’ll understand the financial impact of a conversion. Then you can make an informed decision about whether to proceed.

Q&A: How are IRA withdrawals taxed?

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Dear Liz: I’m aware that assets held in tax-advantaged accounts, such as an IRA or 401(k), avoid capital gains taxes on the sale of an asset. However, will those capital gains taxes have to be paid later when it is time to withdraw money from those accounts? If yes, can I offset it with any capital losses?

Answer: Traditional retirement accounts such as IRAs or 401(k)s change how investment gains are taxed. You don’t pay tax when investments within the accounts are sold, but withdrawals from the account are typically taxed as ordinary income, not as capital gains. So you won’t have an opportunity to directly offset capital gains with losses as you would with nonretirement accounts.

However, if your losses exceed your gains in your nonretirement accounts, you can use up to $3,000 of capital losses to offset ordinary income each year. Any remaining losses can be carried forward to the next year where it’s rinse and repeat: capital losses offset capital gains, with up to $3,000 of any remaining loss used to offset ordinary income. This goes on until the losses are finally used up.

Q&A: Should we be investing so heavily in stocks after retirement?

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Dear Liz: My wife and I are blessed to have a very significant income from real estate holdings that will provide us with almost enough money to live on very well for the rest of our lives. That leaves retirement accounts and Social Security as mostly discretionary or extra income.

Currently, we have 90% of our retirement accounts and Roth accounts in stock. I figured that, given our situation, we can afford the risk. We have the other 10% in an annuity. Just curious to know what you think of our aggressive position. Is it foolish, and should we be more conservative, such as having a portion in bonds?

Answer: Another question to ask is, “If I don’t need to take this risk, why should I?”

Most people need the growth that stocks offer to achieve their long-term goals, such as a comfortable retirement. Even in retirement, people typically need at least some exposure to stocks to offset inflation. To get that growth, investors must endure the inevitable downturns when markets slide. But why take on more risk than you need?

Also consider that real estate income isn’t typically guaranteed. While real estate and stocks aren’t closely correlated in the long run, both can be affected by economic crises. It might be painful to see your main source of income drop along with your stock portfolio.

A balanced portfolio likely would offer more modest returns but sounder sleep the next time the stock market swoons. This would be a great topic to discuss with a fee-only, fiduciary financial planner.

Q&A: Can a QCD be made to a donor advised fund?

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Dear Liz: I read your column about qualified charitable distributions, where you can send a required minimum distribution to a charity so the RMD won’t be taxed. I have a donor-advised fund and would like to know if I can put my RMD into that, rather than send it directly to a charity. The funds in my donor-advised fund eventually get distributed to charities.

Answer: Sorry, but qualified charitable distributions can’t be made to a donor-advised fund. The RMD must go directly from your IRA to a qualifying charity to avoid taxation.

To recap, QCDs are available to people 70½ who can contribute IRA funds to charity (up to $111,000 in 2026). The distribution is not included in the donor’s taxable income and can count toward any required minimum distributions.

Q&A: Was it a mistake to incur a large tax bill?

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Dear Liz: We are a retired couple in our late 70s. I worked as a carpenter and my wife worked as a nurse. We saved and invested for the long haul with a well-known discount brokerage. Last summer, we were wooed by another financial services firm with a “much better idea.” Our combined portfolio at the time was $1,985,000. We transferred our holdings, including $340,000 in a taxable account.

The transfer triggered a capital gain of $184,000 as the new company sold the old funds and reinvested the money according to their plan. This caused us to owe about $50,000 in income tax this year rather than breaking even or receiving a refund. Our holdings have grown to $2,013,119 after our 2026 required minimum distributions have been taken. Was this a good move given the large tax bill? Our tax accountant is very critical of the sale of these funds.

Answer: Your accountant may not be in the best position to evaluate whether this was the right move for you.

Tax pros are typically focused on saving their clients money. That often means delaying or avoiding moves that could trigger capital gains taxes. Sometimes, though, such moves are necessary to avoid even bigger financial costs down the road.

The stock market gains of recent years mean that many people have portfolios that are now too heavily invested in stocks, particularly if they haven’t been regularly rebalancing their investment mix. These stock-heavy portfolios can leave people painfully exposed to downturns.

I redacted the names of the firms, but both companies you mentioned in your letter have good reputations. Your previous brokerage caters to do-it-yourself investors who want to minimize fees, while your new one provides fiduciary advice, meaning that they’re required to put their clients’ best interests first. It’s easy to imagine you investing for decades on your own without an advisor’s help or appropriate rebalancing; the new firm sees how risky your portfolio has become and diversifies it after careful discussions with you about your age, situation and goals.

Imagination is not reality, though, and the most concerning part of your letter is your vagueness about why you moved your money. You should be able to articulate in basic terms why this transfer made sense. “Our portfolio was too risky” or “I had too many of the same type of stocks” or “I realized I needed help” are all appropriate reasons. “A much better idea” is not.

The right move now might be to get a second opinion from a fee-only financial planner. Someone who charges by the hour could review your portfolio and let you know if you’re now on the right track. You can get referrals from the Garrett Planning Network at https://garrettplanningnetwork.com/.