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.
© 2018. All Rights Reserved.
- Qualifying For The New Business Owner Tax Break
- Your Alma Mater Or Your Family?
- This Is Not Your Parents' Interest Rate Cycle
- If Family Is Wealth, Then Planning Is Immortality
- Life Is Fragile, So, Please, Value Each Day As Priceless
- Everything You've Learned About Interest Rates May Be Wrong
- This First Year Under The New Law Requires Planning
- 10 Years After The Great Recession
- Commodities Stink But Serve A Purpose
- Inflation: A Portfolio Risk That Never Dies
- The Interest Rate Inflection Point And Your Portfolio
- New Ways To Influence The Next Generation
- Giving More To Loved Ones - Tax-Free
- New Deduction Rules For Business Owners
- A Bright Outlook For Consumer Spending