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Subject:
Opening a Roth IRA account for a very young child.
Category: Business and Money Asked by: les_claypool-ga List Price: $5.00 |
Posted:
08 Aug 2006 03:48 PDT
Expires: 07 Sep 2006 03:48 PDT Question ID: 753757 |
Roth IRA retirement accounts are supposed to be funded with earned income. Is there any precedence or official explanation on how young a child can be and begin making contributions to a Roth IRA account? For example, if a person pays their four year old child $333 per month to take out the trash, can that $4000 per year be put into a Roth IRA for the child? |
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There is no answer at this time. |
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Subject:
Re: Opening a Roth IRA account for a very young child.
From: myoarin-ga on 08 Aug 2006 04:57 PDT |
ON another question, someone wanted to pay his wife for tax reasons. The answer was that the IRS doesn't go along with that, so I expect "paying" one's child would be considered a gift, especially since I assume that the kid would not be allowed access to the funds. As to the first question: a child actor or model would indeed earn money, regardless of age. |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: jack_of_few_trades-ga on 08 Aug 2006 07:18 PDT |
You can pay your child if you have any kind of business at home. If it would be reasonable to pay someone else the wage to perform a task then you can hire your child instead and pay the reasonable wage. http://www.lifetimefp.net/Advice090301.htm |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: nelson-ga on 08 Aug 2006 16:43 PDT |
Sorry, jack_of_few_trades-ga. Go directly to jail. Do npot pass go. Do not collect $200. That would be child labor. (The kid is 4.) |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: jack_of_few_trades-ga on 09 Aug 2006 05:33 PDT |
"Minimum Age for Employment: The minimum age for employment is 14 years old. There are some exceptions such as newspaper delivery; performing in radio, television, movie, or theatrical productions; and work for parents in their solely-owned nonfarm business (except in manufacturing or in hazardous jobs)." http://www.stopchildlabor.org/USchildlabor/fact1.htm But do check your state child labor laws as they may be more strict than the US laws. If you solely own the business (such as most people who run their own business from home) then your child is fair game as far as US laws go. Hire him to wash the car if you drive at all for work, clean your office... be creative, what else can he do or help with that you could pay someone else to do? |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: govtwork-ga on 14 Aug 2006 13:18 PDT |
There's no free lunch in Roth IRAs. Roth IRAs were designed to accelerate tax payments to the government and they do. (The money is taxed on the way in.) Whether or not a Roth is good for you (or your child) depends on whether you (or they) are in a higher (good) or lower (not good) tax bracket when you take the money out. The real value of a Roth is very difficult to predict when you're a long way from taking the money out. |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: jack_of_few_trades-ga on 15 Aug 2006 04:44 PDT |
Govt, since the question is about a child (with no earned income at the moment), the tax rate is currently as low as it ever will be. The chance that this person will have a lower tax rate in retirement than now is about as close to 0 as possible. Also, taxes today in the US are about as low as they have ever been. I (and almost any expert out there) think that taxes will be on the rise over the next couple decades to pay for all of our old folks and the tremendous national debt. With this in mind, most people are in a lower tax % today than they will be in retirement. |
Subject:
Re: Opening a Roth IRA account for a very young child.
From: hals_take-ga on 15 Aug 2006 20:14 PDT |
If interest is allowed to compound the income would eventually rise to the level of taxability. In a Roth it would compound fully. Granted at this level the difference is not great, but there would be one. |
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