Author Topic: Roth IRA for young kids (5 years old) without a W-4 job?  (Read 10178 times)

Captain Cactus

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Roth IRA for young kids (5 years old) without a W-4 job?
« on: April 30, 2016, 04:38:06 AM »
No earned income from W-4 job, how do I set up Roth IRA for my kids? 

Some say it's possible, I just need the details.  Thanks!

Gin1984

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #1 on: April 30, 2016, 05:39:04 AM »
You need earned income to fund a Roth.

Captain Cactus

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #2 on: April 30, 2016, 05:51:56 AM »
Thanks for the reply.  What is the definition of "earned income"?

What about income earned for stacking wood, redeeming soda cans, etc...?

It's income but not income from working at a business where you need to fill out a W-4?

wienerdog

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #3 on: April 30, 2016, 08:55:16 AM »
It needs to be taxable earned income.

Here is some information that you might be interested in as this seems to be what you're trying to accomplish.

http://paulmerriman.com/time-can-turn-3000-50-million/

for all the articles and pdfs related to it.

http://paulmerriman.com/turn-3000-50-million/


Kapiira

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Scandium

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #5 on: May 05, 2016, 11:08:12 AM »
I'm interested in this too. I assume you need a business to pay your child an income (i.e. you can't just say their allowance is "income"). But how much work is this to set up, and what would be required?

Drifterrider

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #6 on: May 05, 2016, 11:27:10 AM »
I'm interested in this too. I assume you need a business to pay your child an income (i.e. you can't just say their allowance is "income"). But how much work is this to set up, and what would be required?

I'm not answering your question (I don't know the answer) but think of this when the IRS ask:

"Just how does a 5 y/o earn that much money?" (I have no idea how much you are thinking of or if you are just trying to establish a Roth for your child)


Scandium

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #7 on: May 05, 2016, 11:31:34 AM »
I'm interested in this too. I assume you need a business to pay your child an income (i.e. you can't just say their allowance is "income"). But how much work is this to set up, and what would be required?

I'm not answering your question (I don't know the answer) but think of this when the IRS ask:

"Just how does a 5 y/o earn that much money?" (I have no idea how much you are thinking of or if you are just trying to establish a Roth for your child)

Good point, certainly something to be aware of.
One thought; I'm an amateur photographer so what if I set up a photog business and tried to sell pictures (I already have on Shutterstock), and pay my child to assist on photo trips; carry the bag, get lenses, hold the flash etc? This is legit work, as long as he's old enough to make it reasonable (?). Whether it's worth it is another matter.

ThatGuy701

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #8 on: May 05, 2016, 12:27:10 PM »
Natai Morris talks about this, although I am not sure she has thought everything through.

http://natalimorris.com/blog/2015/09/29/why-my-3-year-old-has-a-roth-ira-and-why-yours-should-too/

serpentstooth

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #9 on: May 05, 2016, 12:33:54 PM »
I'm interested in this too. I assume you need a business to pay your child an income (i.e. you can't just say their allowance is "income"). But how much work is this to set up, and what would be required?

I'm not answering your question (I don't know the answer) but think of this when the IRS ask:

"Just how does a 5 y/o earn that much money?" (I have no idea how much you are thinking of or if you are just trying to establish a Roth for your child)

All the minors I know funding retirement accounts are actors, and even then, 5 is really on the young side, at least in NYC, to be making that money. Plays just won't use kids that young for labor law and reliability reasons. Much better to cast a 7 year old who looks 5 instead of an actual 5 year old. They can work a longer day and are more reliable on set. There is real money to be made if you have a child who is short and very young looking for their age, has competent singing and dance, and the ability to behave during a long rehearsal.

Scandium

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #10 on: May 05, 2016, 12:58:25 PM »
Natai Morris talks about this, although I am not sure she has thought everything through.

http://natalimorris.com/blog/2015/09/29/why-my-3-year-old-has-a-roth-ira-and-why-yours-should-too/
Probably not? A link to a lawyer website from there indicated the IRS consider 7 years old the youngest when kids can be useful employees. Mrs Morris' 2 year old with a salary might be asking for an audit..

I have a few years to figure this out it seems, but it sounds doable!

serpentstooth

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #11 on: May 05, 2016, 02:15:11 PM »
Natai Morris talks about this, although I am not sure she has thought everything through.

http://natalimorris.com/blog/2015/09/29/why-my-3-year-old-has-a-roth-ira-and-why-yours-should-too/
Probably not? A link to a lawyer website from there indicated the IRS consider 7 years old the youngest when kids can be useful employees. Mrs Morris' 2 year old with a salary might be asking for an audit..

I have a few years to figure this out it seems, but it sounds doable!

My mother had my 2 year old brother working on the family business. We sold doll clothes, and she had him remove the socks from the bags the wholesaler sent them in into individual little plastic bags for resale. Then I had to staple on the cardboard header and price them. Ditto the doll shoes. We weren't paid, though.

AM43

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #12 on: May 06, 2016, 09:40:30 AM »
I've set up custodial Roth IRA with Charles Schwab couple years ago for my daughter.
She is 11.
We own multiple investment properties and she helps out to maintain them.
I don't contribute max($5500) and try to aim for about $3500 or less annually.
I would not recommend setting up Roth IRA account for children under 9 years old.

tonysemail

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Re: Roth IRA for young kids (5 years old) without a W-4 job?
« Reply #13 on: May 06, 2016, 05:41:36 PM »
yeah, i've thought about this too and I've decided the audit risk isn't worth it until my kids are old enough to actually help.
The main loophole I see for really young kids is modeling.
If your business uses brochures or pictures, then go ahead and pay them market rate to be the models for your advertising material.