One way to help your kids succeed (in their retirement)

“Many parents and advisors may not have considered establishing a child’s Roth IRA.” Brian Dobbis, LordAbbett.com, April 15, 2024.

What Do I think

I ignored this advice when I was a new parent but paid more attention years later when a friend with twin teenagers explained his simple strategy. Kids may earn $1,000-$2,000 over a summer or school year doing a part-time job. Of course they are motivated by money to buy some things, save up for something bigger, or learn how to invest in stocks. 


My friend convinced his kids to put all their earnings into a Roth IRA in exchange for the equivalent in cash. A few formulas in a spreadsheet was all it took to show them the returns. $1,000 a year from age 14 to 21 growing at 6% becomes $325K by age 80. $2,000 becomes $650K. Its a no-brainer. The IRS allows this as long as the annual deposits do not exceed the child’s income for that year. Income can be formal or even informal — tutoring or odd-jobs.


Why should you care

Most teenagers are not thinking about their retirement. Yet, parents want to teach them the value of compounding interest, invest in their future, and protect any potential grandkids! Establish a child’s Roth IRA and give them their equivalent earnings to protect two (and hopefully three) generations.

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