Roth IRA for a 9 year old

[Aggie PhD]

Had a discussion with a friend about finances. Their kid is going to have some 1099 income this fiscal year. I think around $1k total. The kid already has a pretty well funded 529, and also has a small UTMA for savings

Thoughts on creating a Roth IRA for the 9 year old since they have income?
Or would you just dump it into the UTMA

[Shane]

If all the shorter term needs are covered (now through college), starting a Roth for a child would be great for the kid at retirement, assuming that once the kid turns 18 and gains control of the account that he/she wouldn't be irresponsible with the money. Control of a 529 remains with the account owner and doesn't pass to the child at any particular age. A UTMA stays under the custodian's control until the child turns 21. It's hard to know for sure when a kid is 9 years old if giving him/her control of some money at age 18 (or any other age after that) would be good or bad. But that's the only potential downside I can see with funding a Roth at age 9. As long as the kid grows up to be a responsible young adult, then it would be a great head start on a tax-free retirement account. Only the parents can make that judgment call for each individual child. There's no one right answer.

[STGS]

Had a discussion with a friend about finances. Their kid is going to have some 1099 income this fiscal year. I think around $1k total. The kid already has a pretty well funded 529, and also has a small UTMA for savings

Thoughts on creating a Roth IRA for the 9 year old since they have income?
Or would you just dump it into the UTMA

Everyone should try and set up a Roth IRA for their child. They can contribute just like adults, subject to their earned income. Earned income does not have to be in the form of a 1099, W-2 or such. It also does not force them to file a tax return. The tax advantages of a Roth are particularly attractive to low income individuals and kids.

[Aggie PhD]

Everyone should try and set up a Roth IRA for their child. They can contribute just like adults, subject to their earned income. Earned income does not have to be in the form of a 1099, W-2 or such. It also does not force them to file a tax return. The tax advantages of a Roth are particularly attractive to low income individuals and kids.

How does one substantiate to the Govt that a kid has income without the normal 1099/W2 or filing income taxes?
Besides the "Oh the kid made $3,000 this year taking out the garbage...."

I understand any guidance provided here that this person would "need to contact a licensed accountant or tax professional..."

[gingib]

Interesting. Here to learn anyway to save me money and make my family money

[MossyRockRanch]

Both my daughters have roths and have a long detailed list of work they have to complete at ranch. Great way to build wealth and teach kids about working and investing!

[gingib]

Both my daughters have roths and have a long detailed list of work they have to complete at ranch. Great way to build wealth and teach kids about working and investing!

I agree!

Do you pay them? How do you prove to IRS that you pay them? Write a check and deposit in their account?

[MossyRockRanch]

https://discussions.texasbowhunter.com/forums/showthread.php?t=786023&highlight=roth

[MossyRockRanch]

We cut checks QTRLY to them and deposit in the kids savings accounts. We also have a work log that wife tracks and they have to sign ....

* talk with your accountant

[boy wonder]

I'm funding a Roth to the max and know that one day my kids will divide the money equally, unless I spend it . That is a way to contribute on their behalf and have complete control of the account. I'm contributing in a 401k and "backdooring" additional contributions, so I can put a lot more than the limit in the account.

[Aggie PhD]

We cut checks QTRLY to them and deposit in the kids savings accounts. We also have a work log that wife tracks and they have to sign ....

* talk with your accountant

Good to know. Maybe now I can get some work out of them

https://discussions.texasbowhunter.c...highlight=roth

Not sure how I missed this originally.