Author Topic: Roth IRA for my 17 year old son  (Read 1607 times)

Jtrey17

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Roth IRA for my 17 year old son
« on: July 09, 2019, 05:16:25 PM »
Hello, my 17 year-old son got a part-time job and we have been talking about retirement accounts and compound interest. If he is willing to start a an IRA and put the maximum amount in that account, I’d like then turn around and give him that money back into his account. Is this legal to do? I know to contribute to an IRA he has to make the money. What do you all think?

Jtrey17

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Re: Roth IRA for my 17 year old son
« Reply #1 on: July 09, 2019, 05:17:43 PM »
To clarify-I’d give him back the money into his checking account, not IRA.

Frankies Girl

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Re: Roth IRA for my 17 year old son
« Reply #2 on: July 09, 2019, 06:20:26 PM »
You should be fine. You can give him $ in a checking account or contribute to his IRA for him - either way is fine as far that goes.


He can only contribute up to what he actually earns, up to $6,000 max, (for anyone under the age of 50).
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits


Technically anyone can gift money to anyone else, up to $15K (I believe) without having to report a dime of it to the IRS, so that is well below the limits of an IRA contribution. So you yourself (or a grandparent, family friend, etc) can make contributions on their behalf if your kid does have earned income.

Do be aware that once the money is in their account - it is THEIRS and they can decide to pull it out any time despite your intentions. If he decides to buy a fancy car or go on a trip next year, he could liquidate it and you have no recourse to stop him (other than being a very upset parent!). But there are some good things about them too beyond a long-term saving/investment vehicle: Roth IRAs can be used for college, creating a tax-free income source for school tuition, books, fees and boarding. The Roth IRA owner may also access a Roth (up to a certain dollar amount but you'd need to confirm amount) to buy his first home. While a Roth IRA requires the owner to hold the IRA for at least five years and until age 59 1/2 to avoid taxes and penalties on the earnings, the school and home exceptions have penalties waived.

As always, do your own confirmation with a real trusted source as I could be out of date, or just plain wrong... don't think I am, but still. ;)

A Fella from Stella

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Re: Roth IRA for my 17 year old son
« Reply #3 on: July 09, 2019, 08:13:38 PM »
How dare you start an IRA for your kid thread. Now less people will look at the one I started!

Having said that, do a Roth, not a traditional, IRA. The Roth allows him to later take it out without paying any taxes. If it's $5,000,000, it will be tax-free.

Also, don't do IF he will. Just make him because that's what working people do. If it's just something all working people do, then he'll be more inclined to just go with the flow. Or you can have a meeting where the financial advisor shows him the chart that shows him that his little bit of dough will be a lot, and he'll be like "well, I have to. It's too much to let pass by."

Jtrey17

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Re: Roth IRA for my 17 year old son
« Reply #4 on: July 11, 2019, 12:55:30 PM »
Haha! Sorry about that! Just saw your amazing post 😂

A Fella from Stella

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Re: Roth IRA for my 17 year old son
« Reply #5 on: July 19, 2019, 07:39:11 AM »
Has there been a final decision on this? Hopefully so.

nereo

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Re: Roth IRA for my 17 year old son
« Reply #6 on: July 19, 2019, 01:36:43 PM »
Hello, my 17 year-old son got a part-time job and we have been talking about retirement accounts and compound interest. If he is willing to start a an IRA and put the maximum amount in that account, I’d like then turn around and give him that money back into his account. Is this legal to do? I know to contribute to an IRA he has to make the money. What do you all think?

My father did something similar for me when I was 15 (both the Roth contribution and the lesson in compound interest). It's probably the single most important thing that's helped me towards being FI before 40. FWIW my parents gradually transitions from funding my IRA completely (I had earning income from working at a country club and ref-ing soccer games) to matching my contributions 1:1 the next few years. By the time I was in college I was hooked and have funded my IRA every year since.

Chris Pascale

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Re: Roth IRA for my 17 year old son
« Reply #7 on: July 20, 2019, 05:40:36 PM »
Hello, my 17 year-old son got a part-time job and we have been talking about retirement accounts and compound interest. If he is willing to start a an IRA and put the maximum amount in that account, I’d like then turn around and give him that money back into his account. Is this legal to do? I know to contribute to an IRA he has to make the money. What do you all think?

My father did something similar for me when I was 15 (both the Roth contribution and the lesson in compound interest). It's probably the single most important thing that's helped me towards being FI before 40. FWIW my parents gradually transitions from funding my IRA completely (I had earning income from working at a country club and ref-ing soccer games) to matching my contributions 1:1 the next few years. By the time I was in college I was hooked and have funded my IRA every year since.

Your father is a hero. I did the same for my oldest, and it's led the others to wonder why they don't have retirement accounts.

What surprised me was that when her statement came in and said she had $500, she said that it made her feel like she was going to be okay when she was older.

I really didn't anticipate that.