If you plan to gift to your children or grandchildren this year, and they held a summer job in 2014, consider contributing to a Roth IRA on their behalf in order to provide for tax-free income for the child’s or grandchild’s future retirement. The deadline for a 2014 Roth IRA contribution is April 15, 2015 and the maximum amount is the lesser of $5,500 or the amount the child earned. There are no age restrictions on opening a Roth IRA.
In general, contributing to a Roth IRA for your child or grandchild can be an excellent way to teach positive money habits. This gift can be used to incentivize them to work (by matching their income via a gift to a Roth IRA), teach them to manage money wisely (by experiencing the markets in a disciplined fashion) and encourage them to save for retirement at a young age.
There are broader implications of making these gifts to Roth IRAs. If you would like additional information or have questions, please contact Lee McGowan, CFP®.
