July 3, 2012
What parent isn’t concerned with their children’s future? And part of this concern relates to ensuring our children’s financial well-being. So, IRA’s for kids? Yes, really! The opportunity for retirement savings begins as soon as kids start to earn money, so why not begin educating them now on saving for their future?
IRA’s, whether traditional or Roth, are available to anyone, regardless of age, as soon as they have income from a job. For kids, this is anything from babysitting and lawn mowing to a position at McDonalds or within your small business. As long as the income is reported to the IRS on a W-2 and/or in the child’s tax return, the child is eligible for an IRA contribution. Even better, an unmarried dependent child’s standard deduction in 2012 shelters the first $5,950 of earned income from taxes. That means contributing to a Roth IRA is a slam dunk—offering completely tax-free growth and withdrawals for years to come. The only limitation is that kids can contribute the lesser of $5,000, the amount of their earned income for the year, or any amount up to the limitation.
Another perk of the Roth IRA is that it can be used as a vehicle for college savings, as contributions to a Roth IRA can be withdrawn penalty- and tax-free as long as the money is used for qualified college expenses; for example, tuition, books, equipment and fees. (Note: funds cannot be used for room and board.) Additionally, retirement plan assets are not included in most financial aid calculations, so if financial aid is required, IRA funds should not factor in.
For more information on how IRA’s for kids can offer tax benefits, please contact our firm. We are always here to help!
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Labor Day is upon us—a popular holiday that is dedicated to the millions of women and men who keep this country going strong. For many, it also means that it’s time to break out the grill for that big end-of-summer celebration. And because most of us aren’t Grill Masters, this is a good time for a refresh on some basic grilling safety tips to keep everyone safe and the party going.
Let’s face it. Kids aren’t cheap, so you have to save money where you can. Back-to-school shopping is a good place to start because costs can add up quickly—especially if you have more than one child. Consider these tips for sending your kids back to school without breaking the bank.