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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76078  
Subject: Re: IRA for 13 yr. old Date: 8/8/1999 10:27 AM
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Greetings, Judith, and welcome. You asked:

<<Hi, my mom told me to write. I usually make atleast $50 a week babysitting and thought that maybe I should consider an IRA. I have called several brokerage houses and mutual fund companies but they won't do it for me because of my age. I have heard that kids can get them somewhere but I can't find them. Does anyone know where?>>

Because of age issues and the fact that minors cannot sign an enforceable contract, it's difficult for those of your years to find an IRA provider willing to accept your account. Nevertheless, they are available. I understand that the Vanguard family of mutual funds does accept IRAs for minors, but I'm also told that often the regular sales staff does not know this, so it may take persistence and insistence on your part to get them to agree to do so.

The bigger issue, though, is can you even open an IRA? While the money you earn from babysitting is technically taxable compensation, it can be challenged as inappropriate earnings for an IRA contribution. You earned it as a self-employed person. Did you pay the FICA (i.e., Social Security tax) on those earnings? Did you make estimated income tax withholdings on those earnings? That and a whole host of other issues lead me to conclude that in the absence of a W-2 from an employer to substantiate those earnings, you will encounter more hassle than benefit from using that income for an IRA contribution. For a complete discussion, see the thread on this board that starts at http://boards.fool.com/Message.asp?id=1040013000935000&sort=id.

I commend you for your thoughts, and I urge you to continue your investments of those monies. However, I also suggest you do so in a regular account until you later begin regular employment. At that time, which shouldn't be too many years off, you can use those wages to justify an IRA with ease. As to what to do with the money now, you may be interested in what other teens do. For that, see our area at http://www.fool.com/FamilyFool/1998/FamilyCollection980325.htm.

Regards and Fool on..Pixy
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