Parents with teenagers should consider opening a Roth IRA for them - Charleston Post Courier
Parents with teenage children have many competing financial demands facing them, so opening a retirement account for those kids may not be on their radar. However, there are compelling reasons to establish a Roth IRA once a teenager is earning some income, and this isn’t just something for affluent families to consider. In addition to saving for retirement, Roth IRAs can be used without penalty to help pay for a first home, to pay higher education expenses, and even to pay medical bills that exceed a cost threshold. So, by opening a Roth IRA for a teenager — the contribution can’t be larger than their earned income that year — you start the five-year clock. That’s crucial, because the earlier they start, the easier it will be to accumulate savings, because of the compounding effect (you earn interest, then you earn interest on the interest earnings, and so on). In addition to the many ways a Roth IRA... You don’t get a tax deduction for contributing for a Roth, and you don’t owe tax if you later withdraw the money contributed. The earnings — interest, dividends, capital gains — are the part of a Roth IRA account that can be subject to tax and penalties if the money is withdrawn before retirement. Source: www.postandcourier.com
