this post was submitted on 17 Jul 2023
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IRA for a child (lemmy.world)
submitted 1 year ago by [email protected] to c/[email protected]
18 comments fedilink hide all child comments
 

I've heard this is a good way to set your kid up for success and take advantage of compounding. One of the parts I always get caught up on when looking into it, is that your kid needs some form of taxable income, and whatever they contribute, you can match it.

If you have a child that is just a couple years old, how do you accomplish this? I can't just say I pay her $3000 a year for picking a book to read each night..or can I?

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[–] [email protected] 13 points 1 year ago (10 children)

Your kid would need reported W2 income to be eligible. Start a 529 plan instead.

[–] [email protected] 3 points 1 year ago (2 children)

Agreed that a 529 seems to be the right answer. Be aware that it does have its own rules and limitations (main goal is for it to be used towards education), which I believe can be broken for a percentage fee.

[–] [email protected] 1 points 1 year ago (1 children)

Right. I set up one of these when my child was born, but was looking for other options as well. The 529 will probably reach it's peak right before college, where as an IRA will (potentially) grow for another 40 years

[–] [email protected] 4 points 1 year ago

A law was recently passed allowing up to 35k from a 529 to be rolled into a Roth IRA in the beneficiary's name, so that could be an option. There are some stipulations but it's better than it going to waste.

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