If your child has a summer job, he or she can make a contribution to an IRA for 2017.
As a general rule, anyone can open an IRA and contribute up to the amount of their wages or self-employment earnings. There is an upper limit of $5,500 for 2017. Your child can contribute to either a traditional, deductible IRA or a nondeductible Roth IRA. For your child, who is likely to be in a low or zero tax bracket, the Roth IRA may be the better choice since qualifying withdrawals will be tax-free.
Consider this: A one-time contribution to an IRA can grow dramatically. A single deposit of $3,000, for example, will grow to over $34,000 if invested at 5 percent for 50 years.
If your child does not wish to use his or her summer earnings for a retirement fund, you or a grandparent can help out. As long as the amount put into the IRA does not exceed the child’s wages, it doesn’t matter where the money comes from.
If this is an affordable option for your family, your child could have a big head start in building a nest egg. Call us if you have questions.