A while back we first came across the neat Tax/Retirement/Donation/Savings technique utilizing low/early career income relatives (think young kids/adults) of basically helping them fund a Roth IRA.
Give a Kid a Roth – Blending Tax Techniques to Accomplish
We all know starting early greatly helps our future retirement planning chances… Marry that to tax free growth AND under CURRENT Tax laws, Tax Free withdraws, and we have a neat plan.
Let’s blend some tax techniques and get this accomplished:
In the year 2023 we can give $17k to basically anyone without causing a Gift tax event…. the max for young earnings is $6500 into a Roth this year!
Have a Child/Grandchild/Relative or special young person in your life? If they have at least $6500 in income this year, consider giving them a Roth IRA to help jump start their retirement…. the earlier the better of course.
Kids working at your or a relatives business? Consider funding a Roth with their income… maybe a well earned bonus goes directly into the Roth?
Make sure the young earner does not over save in their Retirement plans – Max into a 401k is $22,500 this year and that includes a Roth contribution… so do not overfund.
Watch the top end of annual earnings as well… from our Tax Page Right here on our Blog
Lastly…the Sizzle —
Just one $6500 Roth for a 15 year old, growing at 8% annually, will be worth a whopping $300k+ at age 65 … do that three times to get to a million… and that is tax free withdrawals at retirement! NICE!
Have a Great “Give a Kid Roth” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
