IRA for Kids

October 23, 2013

If you have an enterprising son or daughter who has earned income through an after-school or summer job, you can help them open up an IRA. Your kids are eligible for the Roth or Traditional IRA as long as they have earned income. When setting up the account, a parent or another adult will be asked to cosign the paperwork accepting legal responsibility for investing the child's money. Once established, you and/or the child can contribute an amount equal to his or her income, or $5,000.00, whichever is less to the IRA for the year. Opening an IRA not only encourages your child to save more, but you can also help him or her choose from a wide range of investment options and track their progress over time. Your child can put this money in a Roth IRA and with a Roth IRA, they can invest in virtually anything inside the Roth IRA, such as stocks, bonds or mutual funds. Also, with the Roth IRA, withdrawals from the account may be tax free, as long as they are considered qualified such as for their first home purchase, higher education or it can be left in there for their own retirement. Withdrawals prior to age 59 1/2 could be subject to a 10% IRS penalty. Future tax laws can change at any time and may impact the benefits of Roth IRA's. Their tax treatment may change.

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