The saying, “it’s never too early to begin saving for retirement,” holds true at any age, even for kids in high school. In fact, if you have teens, the start of the summer job season is a great time to talk to them about starting an IRA. Due to their age, teens are poised to take full advantage of the power of compounding over time. In addition, saving through an IRA can be a valuable tool for educating young people on the value of money and how it grows, including the concepts behind interest, earnings and compounding.
Regardless of age, minors can contribute to an IRA provided they have earned income from a job. Because many kids don’t earn enough money to benefit from the up-front tax deduction associated with Traditional IRAs and are in a low or zero tax bracket, a Roth IRA makes sense in most cases.
If you or your children are interested in learning more about the value of saving through an IRA, please don’t hesitate to contact us. School may be out for the summer but financial education never ends!
Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor.