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Hello Fools,
I have loooked, tho' not completely, at prior posts to find out what is the minimum age/income for a person to open up a Roth IRA? Maybe there is a link I could go to? Sorry if this has been answered before.

My 15 year old daughter has received a modest inheritance from her grandfather and I thought this would be a great time to get her started saving for retirement. (Won't Social Security take care of that?) ;)
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RobinFool asks:
what is the minimum age/income for a person to open up a Roth IRA?

There is no 'minimum' age, but one can only contribute the lesser of "total earned income" or "$2000" per year. If you have NO earned income, you can not contribute to your own Roth IRA (... since we're taling about your 15 y/o daughter, we'll ignore the possibility for a spouse to contribute to the home-making spouses' IRA...}

My 15 year old daughter has received a modest inheritance from her grandfather

Inheritances are NOT earned income, so this money can NOT be directly deposited into an IRA. However, if she has (any) earned income (baby sitting, p/t job, lifeguard, etc...} she can contribute up to $2000 / year (if she earns that much) into a Roth.

>> I thought this would be a great time to get her started saving for retirement <<

Indeed, yes. But let me take a contrarian viewpoint for a minute. The tax-deferred (or avoiding) nature of IRAs are great, but there is also no reason to discourage a regular taxable account investment, especially if the ROth contribution is maxed out or if there is no earned income. Your daughter is old-enough to avoid the kiddie-tax (kid's earnings taxed at parent's rate) yet young enough to probably not be in such a high rate bracket (... in fact, if she doesn't sell anything, then she'll have no income to report anyway...)

So whether or not you open/start an IRA account, I encourage you to open a custodial account and let her begin to invest her 'modest inheritance' already.

My 'contrarian' side says that having the investments in an accessible account, rather than IRA tied up for 41 years, is NOT a bad thing.

- D
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DowDanny, in an otherwise excellent response to a query on a child's IRA posted by RobinFool sez:

<<However, if she has (any) earned income (baby sitting, p/t job, lifeguard, etc...} she can contribute up to $2000 / year (if she earns that much) into a Roth.>>

All true, but I would strongly caution that such earned income be fully supported via declaration on an income tax return and appropriate withholdings for both taxes and FICA during the year. Casual work such as baby sitting results in income, but it's a type of income that is neither Congress nor the IRS expects to be reported or taxed. Using same as justification for making an IRA contribution is just begging for trouble IMHO.

Regards..Pixy
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don't know that i'd call it 'contrarian', but
otherwise i agree. acquiring the Savings Habit is
a Good, regardless of tax implications. (wish i'd
got the habit before age 45)

you might also look into Educational IRA. i believe
it's a $500 max per year, regardless of income and it
all comes out tax-free for Educational purposes.


good luck,

jp
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Wow, I feel like I have been blessed with wisdom from Fools! Thanks DowDanny for not only answers but your insight. We can use you over on the Dell board. Thanks also to Pixy & x4 for your contributions.

This may sound corny, but most people are really great!
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RE: if she has (any) earned income (baby sitting, p/t job, lifeguard, etc...} she can contribute up to $2000 / year ...

TMF Pixy correctly points out:
I would strongly caution that such earned income be fully supported via declaration on an income tax return and appropriate withholdings for both taxes and FICA during the year.

In a separate discussion, TMF Taxes pointed out similiar problems in "paying Grandma to babysit, so she can open an IRA with Junior as beneficiary."

My comment on 'contributing your daughter's baby sitting money' is really only appropriate for contributions (and income) under the IRS filing limit, which I think is something like $600 or $650 per year. Below that limit, one need not file a return, so the IRS would also not have any reason to question the source of the IRA-contribution.

- D
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