Now that Summer is here, are your kids working? Don’t forget about the opportunity to open or contribute to a Roth IRA for them. Roth IRAs are a great tool to help young people get started on their path to financial independence. Roth IRAs are a way to build wealth tax-free and ensure tax-free distributions in the future.
Anyone who has earned income can open a Roth IRA if they meet the following criteria.
- Single with Adjusted Gross Income limit of $138,000-$153,000
- Married with Adjusted Gross Income limit of $218,000-$228,000
- You can contribute up to a max of $6,500 with $1,000 addition catch up if you are over 50 years old.
Most first-time wage earnings are well within the income limit. However, they are only allowed to contribute up to the amount of what they have earned.
- Example: If someone earns $2,500 during summer work, they can only contribute up to $2,500, not $6,500.
I would recommend anyone who has income and can qualify, should have a Roth IRA. Especially young adults who are just starting out.
If you know someone who is just starting to earn wages, call us for some strategies for opening a Roth IRA for them.
It is never too early to start on the road to financial independence.
Note: You may take nontaxable withdrawals from a Roth IRA if you are at least 59 ½ and the account has been held at least 5 years. Otherwise, earnings withdrawn may be subject to ordinary income tax and a 10% penalty. All investing involves risk including the potential for loss.
Stephen Moss is a Registered Representative offering Securities through UNITED PLANNERS FINANCIAL SERVICES, Member FINRA/SIPC. Advisory Services are offered through Pegasus Financial Group. Pegasus Financial Group and United Planners are not affiliated.
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