Did your kids work over the summer?
If so, you are able to open up a Custodial ROTH IRA for them!
$1,000 invested today could be more than $100,000 when your child reaches retirement.
ROTHs are ideal wealth accumulating vehicles as they grow tax free and if they don’t tap into it until they are beyond 59.5 years of age, the withdrawals are entirely tax free. Some parents and teens may feel a bit uncomfortable tying up their funds for decades, which is totally understandable. But the great thing about ROTHs is that you can always withdrawal your contributions penalty free and use $10,000 for a first-time home purchase penalty and tax-free.
A client of mine, a small business owner, has both of her kids on the payroll. They do odd jobs, like shredding paper, taking out the trash, etc. She pays them up to the standard deduction ($13,850 for 2023), so there’s no additional tax burden. She then determines how much should be spending money and how much to put in the ROTH IRA, every year since they turned 13. Her 17 year old now has a little over $20,000.
Should this money continue to grow, undisturbed for another 43 years, it is likely to amount to over a million. Powerful, yes?
Not only will you be setting your kids up for a nice retirement, but this can also be a valuable way you can begin teaching them about the financial world.
The foregoing content reflects the opinions of Mountain Wealth Planning and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.
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