Thursday, December 06, 2018

Opening a Roth IRA for our Daughter

This year, our daughter started her first job, reffing kid's soccer games.   The pay was good, about $15/hour.   Between reffing and plant watering, she earned $295 this year.

Since she has earned income this year, our daughter can contribute up to $295 to an IRA, either a Roth or Traditional (deductible) IRA.   Since her earnings are below the $1050 standard deduction for dependents and below $433 threshold for self employment taxes, our daughter doesn't not owe any income nor self employment taxes.  She also does not owe any state taxes.  Therefore, contributing to a Roth IRA is best since the earnings are tax free when withdrawn and there is no deduction benefit for contributing to a Traditional IRA.

To make the decision easy for our daughter, I will gift $295 to her to open the Roth IRA.  That way she can keep the money she earned and still start a retirement saving account. 

For more on Crossing Generations, check back Thursdays for a new segment.

This is not financial. investment, savings nor tax advice. Please consult a professional advisor.

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