Your Kid’s Summer Job Could Help Pay for their Retirement
Who doesn’t remember their first job? Whether it’s babysitting or scooping ice cream or waiting tables, getting a job is a great way for a young person to learn responsibility. It’s also a great way to build generational wealth through a custodial Roth IRA.
A custodial Roth IRA is opened by a parent on behalf of their underage child, and there is no minimum age to start contributing. The only stipulation is that your child be earning income. So, when your kid starts lifeguarding or mowing lawns, you can contribute their earnings (currently up to $6,500 per year) into their Roth IRA. The money in the account will grow tax-free. The contributions can be withdrawn without penalty at any time, but the gains can’t be withdrawn tax-free until your child turns 59 ½. If they do withdraw earnings before then, there will be a 10% tax penalty.
Delayed gratification is hard – especially when your kid wants to spend their summer salary on concert tickets. You have to save up a small fortune these days just to see Beyoncé! But in this case, the future savings are well worth the patience. To quote Queen Bey, “my great-great-grandchildren already rich,” so if you want to be like Beyoncé, it’s time to get your kids and grandkids a custodial Roth IRA.
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The information contained does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Centrix Wealth Partners and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results.
Contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.