Summer is almost here.
Although the official beginning of Summer is a couple weeks away, many college and high school students already have found summer employment and are hard at work. Others will be starting their summer jobs in the weeks to come.
Now is a good time to suggest helping these hard working young people get their retirement savings off to an early start. Parents and grandparents can contribute up to $5,500 to young worker’s Roth IRA. If properly invested, the funds can grow into hundreds of thousands of dollars by the time these youngsters retire at age 65 or 70. The funds can be withdrawn from the Roth account tax free after age 59 and a half.
This is an uncommon “loophole” in our tax system that rewards “little” people for working. Contributions to Roth IRAs are subject to a dollar limit ($5,500 for for 2017) and an earned income limit. Contributions cannot exceed the student’s earnings from employment (including self-employment).
– Mark S Gleason CPA