Ifyour son or daughter has a summer job you should consider opening up a Roth IRAaccount for him or her.
Toqualify for an IRA your child must have “earned income” — wages or “netearnings from self-employment.” Money you give your child for doing choresaround the house doesn’t count, but earnings from babysitting or mowing lawnsmay qualify.
Youcan contribute 100% of your child’s earnings to the account, up to a maximum of$5,000. If your son earns $2,400 for the summer you can contribute $2,400 to aRoth IRA for him. If he earns $6,500 you can contribute $5,000.
There isnothing in the tax code that says that the money deposited in an IRA for yourson or daughter has to come from the child’s funds.
Thereis no tax deduction for contributing to a Roth IRA, but most teenagers don’tneed the deduction. Qualified distributions from a Roth will be exempt from federal,and probably state, income tax (assuming the idiots in Congress don’t changethe law in the future).
Youcan use a Roth IRA to encourage your children to work or to save. If your sonearns $5,000 in a part-time job, open a Roth IRA for him. Or, if your daughter agrees to put $2,500 ofher salary from a summer job in a Roth, match it and put in another $2,500.
Ifyou put the maximum into a Roth each year for your 16-year-old from 2012through 2017, when he/she will turn 21, and no other contributions are evermade, the account could grow to a truly tidy sum (in 6 figures) by the time thechild turns 65.
Onecaveat - there exists a potential problem with opening a Roth account for achild. Once the child reaches the “age of majority,” usually 18, he/she willhave full access to all the funds and can “take the money and run.”
TTFN
Hiç yorum yok:
Yorum Gönder