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I'm thinking about my still-toddler boy, and trying to figure out how to help him get an income which would allow him to start contributing to a Roth IRA. I am aware that the value of such an IRA could negatively impact his qualification for financial aid for college.

Do you think this is a good focus for his finances at such a young age and if so, what creative ways can he obtain income which meets the qualifications for Roth contributions? My hope is that such long term tax-free compounding of gains will be a huge help for his retirement nest egg.

Will
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1 Answers1

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It's a matter of keeping contemporaneous records for legitimate income. My daughter started baby sitting at age 11, and even then, was earning $10/hr. I told her that in exchange for keeping a notebook listing the date, name, time, and money earned, I'd make deposits to her account. It's important to note that the exact dollar earned doesn't have to be deposited, only that there's income greater than the deposit. It can come from savings or a gift.

The limit to deposit is $5500 in 2015 or the child's earned income, whichever is less. For a toddler, aside from modeling/acting, I don't know what earned income he might have. As he gets older, yard work in the summer or snow shoveling in the winter can both add up fast.

JoeTaxpayer
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