In this article, we explore why a Roth IRA is one of the greatest money making assets for working teens. When working teens invest early in a Roth IRA, they can contribute to a strategy that could accumulate millions later in retirement. Working teens can contribute to a Roth IRA when a parent or grandparent opens the account. A Roth IRA can be opened at any age if a child has income. For example, if your five-year-old child was a model for a local store and received a paycheck in their name, the amount received can be contributed to a Roth IRA.
Working teens receiving W-2 income with a checking account in their name can have automatic contributions deducted and deposited into their Roth IRA. Or, if the teen doesn’t receive a W-2 for money from mowing lawns, babysitting, or other work, the income must be reported to the IRS through income tax filing to qualify for Roth IRA contributions. However, due to the teen’s low income, they likely will not have to pay social security, local and federal taxes.
The teen doesn’t need to make contributions themselves. Parents and grandparents can contribute on the teen’s behalf. Only if it doesn’t exceed the teen’s income for the year and is below the IRS limits. Assisting your team with this money-making asset for working teens Here are other things to know about Roth IRAs for working teens:
There are many reasons why parents and grandparents may want to open a Roth IRA for a teen:
Early exposure to saving and investing can help teens learn about investment strategies and confidently manage their finances throughout adulthood. If you have questions about Roth IRAs and their appropriateness for your teen and your situation, visit your financial and tax professionals. Contact a professional about the benefits of setting up this money-making asset for working teens.
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At Tri-Tex Insurance Agency, our goal is to help you gain a better understanding of financial concepts. Concepts like insurance, investing, and wealth preservation. In conclusion, contact us today to get started with the insurance review process. In addition, we look forward to working with you and your family.