Notes to Know: Minor Roth IRAs

Updated: Jun 10, 2020


"If I'd have had more time, I'd have written a shorter letter" ~Blaise Pascal


This note is excerpted and edited from an article by the web service

Nerdwallet. The complete article can be found here.


Roth IRAs are a great retirement tool, particularly in the post SECURE Act

world. They are extra powerful for children who don’t have a lot of taxable

income today (as they don’t provide a current income deduction; however, the

growth in these accounts is never taxed, assuming the child waits until

retirement age to withdraw the funds (currently defined as 59 ½). That is an

awful lot of tax –free compounding for a young person!


The Basics:

  • There are no age restrictions. Kids of any age can contribute to a minor Roth IRA if they are under 18. NOTE: Various custodial firms do have different rules regarding availability and age, so check with your advisor.

  • A parent or adult will need to open the account for the child.

  • The child must have earned income. This may be earned from a W-2 job, or from self-employment such as babysitting, yard work, etc.

  • The child can contribute each year to the Roth up to 100% of their earned income or $6,000 annually, whichever is less.


Why a Roth:

  • In most cases, the child's overall income tax bracket is not high enough to benefit from the deductibility of the pre-tax contribution.

  • Roth's work best when your current tax bracket is low and your time horizon is long, making them an excellent option for kids.

  • Roth IRAs offer several other withdrawal options, which may prove valuable over the course of the investment period. Consult your advisor for details.

In looking at a young person with a time horizon of say, 50 years until retirement

(keeping in mind that life spans and typical retirement ages are widely expected to

increase over that time frame), saving a couple of thousand dollars starting at age 15,

saving $100/month, and compounding at a reasonable rate of return, your child’s

investment could grow to… I don’t even want to say. I’m sure my Compliance

Department would have a heart attack if I started projecting returns in here.

However, if you’re interested to play with possibilities yourself, try exploring the

compound interest calculator at Investor.gov, a service of the U.S. Securities and

Exchange Commission, found here.


IN SHORT, Minor Roth IRAs are a powerful tool for your child to start learning

financial responsibility and to get them planning for their own personal financial

success. Contact your advisor to get started today!

Make it a Great Day!

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Cascade Apollon a d/b/a of Apollon Wealth Management, LLC (Apollon) is a registered investment advisor This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited.  Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website http://apollonwealthmanagement.com for other important disclosures.