This op-ed explores the benefits of establishing a Roth individual retirement account (IRA) for children as early as possible. The author, a financial advisor and mother of three, highlights how even small contributions can grow significantly over time thanks to compound interest. She emphasizes that while kids might not grasp the concept of retirement now, starting early teaches valuable lessons about saving and prioritizing financial goals.
Establishing a Roth individual retirement account for youngsters is a powerful way to set them on the path to financial security.There's no minimum age requirement for contributing to a Roth IRA; if a child can earn money, they can have a Roth IRA.
While the child needs to have earned income to qualify for contributions, the money used to fund the Roth IRA can be contributed from someone else. This means the child can keep their earnings for immediate spending, while the Roth IRA is funded separately, helping them build a financial foundation without dipping into their own pockets.There's no minimum age requirement for contributing to a Roth IRA; if a child can earn money, they can have a Roth IRA.
Even if the child is not required to file an income tax return, the parent or other custodian must still keep careful records of the earnings that are used to contribute to the Roth. Self-employment income might be subject to additional taxes such as Medicare and Social Security. It's wise to consult a tax professional to ensure compliance and maximize benefits.
There are other advantages as well. Contributions are made with after-tax dollars, so withdrawals during retirement can be tax-free, provided certain conditions are met. This is particularly advantageous for children, who are likely in a low or zero tax bracket now, which allows them to grow their investments without the burden of taxes.
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