At Back-to-School Time, Consider a Roth IRA for Your Child

Some of the money your child earned over the summer could grow tax-free into a nice nest egg in a Roth IRA. Here are some tips to get them started and ideas to offer incentives.

(Image credit: PeopleImages)

As kids across the country head back to school, many are leaving behind their summer jobs. Whether it’s a teenager babysitting or mowing lawns, a high school student working for a painting crew or a moving company, or a college student with a paid internship in a law firm or accounting practice, all have one thing in common … the opportunity to contribute to a Roth IRA.

Roth IRAs are especially appealing to students, since most probably don’t earn enough to pay income tax, and thus would get no tax benefit from making a traditional IRA contribution. For 2017 those individuals with earned incomes below $6,300 and unearned incomes of $1,050 don’t pay any income tax. This covers most students age 21 and under working summer or part-time jobs.

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Mike Palmer, CFP
Managing Principal, Ark Royal Wealth Management

Mike Palmer has over 25 years of experience helping successful people make smart decisions about money. He is a graduate of the University of North Carolina at Chapel Hill and is a CERTIFIED FINANCIAL PLANNER™ professional. Mr. Palmer is a member of several professional organizations, including the National Association of Personal Financial Advisors (NAPFA) and past member of the TIAA-CREF Board of Advisors.