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Roth IRA's for Kid's

November 25th, 2007 at 04:28 pm

I have been reading increasing information on starting kid's with their own Roth IRA accounts so that at a young age they can definately benefit from long term return. It didn't even occur to me two years ago that I would be one of the few people around my area to open a Roth IRA account for my daughter. I guess that the ah ha moment just occurred to me to do it and it just made so much sense(Parents open bank accounts all the time for their kid's so why not an IRA).
My reasoning for doing this is, my daughter was and still is in college and has a small part time job which barely covers her living expenses. So, I just thought that it would be a good idea to just get her started. I don't fund her account to the max every year. I put in just about what she earns in a year. I will keep putting money in until she is able to fund her Roth IRA herself. Thereby taking full advantage of her age and her retirement date. She should be able to accumulat a nice sum by then.

5 Responses to “ Roth IRA's for Kid's”

  1. disneysteve Says:

    That's a great idea and a terrific gift to your kid.

    Just to be clear, though, a child can only have an IRA in his name if he has earned income and can only contribute up to the amount earned. So you couldn't put $4,000 in your daughter's account if she only earned $2,000, for example.

  2. monkeymama Says:

    I almost posted on this today. Mymoneyblog.com had a good discussion on this today. You could fund IRAs from chores and neighborhood work like babysittitng and lawn work, if you report it as taxable income (for the younger set). Basically it is never too young to start!

  3. Ima saver Says:

    Great idea!!

  4. moneycents Says:

    I kind of know how much my daughter will make with in a given year depending on the type of job she has and how many hours she will be working and then I guesstimate how much I will put in. For the past two years I have put in 1800.00/tax year into an automatic monthly deposit through T.Rowe Price. I don't have to put the whole lump sum in right away. If the kids are younger and have jobs at the supermarket and so on they can certainly open an IRA. I think it would be kind of tricky if they were really young, unless they were doing child modeling or something of that nature.

  5. disneysteve Says:

    Also remember that you have until April 15 of the following year to make the contribution, so if you aren't sure how much your child will earn, wait until after 12/31 and then make the contribution. That way there is no chance of over-funding the account.

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