Have Your Child Kick Into A Roth With A Reward To Boot
Suppose your teenage child lines up an after-school job and is raking in the money. Your progeny might have an eye on the latest X-Box or iPhone, but there are plenty of other ways to spend that hard-earned cash.
Why would a high school student contribute to a Roth? This is a good time to teach your child about the benefits of tax-advantaged accounts. If your 17-year-old puts away $5,500 each year (the current maximum) and receives a hypothetical 7% annual return, the stash will grow to a staggering $2,235,909 by the time he or she is ready to retire at age 67!
What's more, future distributions from a Roth may be 100% tax-free. Although you generally have to wait until age 59½ to qualify for this treatment, earlier distributions may be wholly or partially tax-free under certain circumstances.
Finally, if you want to take some, or all, of the sting out of the situation, you can give your teenager a cash gift for up to the amount of the Roth contribution. This is perfectly legal as long as the child has earnings from a job. Plus, there's no gift tax liability because the maximum IRA contribution is less than the $14,000 a year you can give without tax liability. Everybody wins.
© 2017. All Rights Reserved.
- 6 Ways To Close The Retirement Gap
- Foreign Intrigue In Estate Planning
- The myRa Is Cut Short, But Other Options Abound
- Are You "Rich" Or Not? New Survey Hits The High Points
- Why Aren't More Millennials Moving On Up And Out?
- Lending Money? Watch Your Tax Step
- How To Spell Estate Tax Relief
- Watch Out For "Grandparent Scams"
- This Tax-Free Rollover Goes Right To Charity
- ETFs Can Provide Some Other-Worldly Benefits To Investors
- Four Tax Strategies In Retirement
- Why Turn Down An Inheritance?
- Do You Deserve A High Grade In Financial Literacy?
- Six Tax Items For Small Businesses
- How Now, Dow Jones Industrials?