A parent or any other adult can contribute to a child's Roth IRA, as long as the child has earned income from work for the year. If you start early and consistently contribute the maximum amount, your child has a chance to get a million-dollar Roth IRA before retiring. Direct contributions to a child's Roth IRA can be a gift from you or someone else. And they really are gifts that continue to be given.
To ensure that the funds are managed properly, it is important to find reputable IRA Gold custodians who can help you manage the account. Since Roth IRAs can be invested in almost any type of asset, they are likely to perform much better than a savings bond or an old bank account. Your child, regardless of age, can contribute to an IRA as long as they have earned income, defined by the IRS as all taxable income and wages from working as an employee or from running or owning a business. Help a child invest for the future. This account can be opened and managed by any adult parent, grandparent, aunt, uncle or family friend on behalf of a minor with an income.
Because Roth IRAs allow for both tax-free growth and tax-free withdrawals, they offer an enormous opportunity for young people. A Roth IRA is more flexible than other retirement accounts because contributions can be withdrawn at any time. If you're ready to create a Roth IRA for a child, the first step is to contact a brokerage agency that offers Roth IRAs for minors. Of course, they are custodial or custodial accounts, meaning that an adult controls IRA assets until the child reaches the age of majority of 18 or 21 (depending on the state).
Next, we'll look at two types of IRAs for children, the benefits offered by these tax-advantaged investment instruments, and how to open and make contributions to an IRA for children. Roth IRA providers usually require an adult to open and manage a Roth IRA with custody on behalf of a child. By law, banks, brokers and investment companies require custodial or guardianship accounts if your child is under 18 in most states; under 19 and 21 in others). In general, the Roth IRA is the preferred IRA for children who now have limited incomes, as it is recommended for those who are likely to be in a higher tax bracket in the future.
A potential downside to a Roth IRA for children is that eventually, your child could make too much money to continue funding the account. Another thing to keep in mind is that, unlike traditional IRAs, Roth IRAs don't require minimum distributions (RMDs) when you reach a certain age. All funds, both their contributions and the earnings they have accumulated, are considered pre-tax in a traditional IRA. Children of any age can contribute to an IRA as long as they have earned income from a job, either from an employer (such as a newspaper or a lifeguard) or from a small business of their own.
If your children leave their money in the Roth IRA until retirement, they could expect 50 years or more of investment growth, completely tax-free. Opening an IRA for your child not only gives them an advantage in saving for retirement, but also valuable financial lessons.
