A recurrent issue discussed on the boards is whether a parent can establish a Roth IRA for a child. The short answer is "no," because of the "earned income" requirement. I think Congress should amend this aspect of the law, and I have written Bill Roth (who happens to be my Senator) to suggest the change. I urge all Fools to write Senator Roth and their own representatives. I have appended the text of my letter in case you find it helpful as a model. I'm posting this elsewhere as well, so you may see it multiple times.Let's see if grass roots politics, Fool style, can have positive results!The Honorable William V. Roth, Jr.United States Senate104 Hart Senate Office BuildingWashington D.C. 20510Dear Senator Roth: Thank you for your continuing hard work in the United States Senate, and particularly for your success in establishing the Roth IRA. I write to suggest a minor change in that retirement vehicle that I believe would significantly enhance its role as a retirement savings device: Parents should be able to contribute after-tax dollars into a Roth IRA for a child, up to the annual contribution limit for the child, under an exception to the current requirement that an individual only can make contributions out of that individual's "earned income." This suggestion arises out of my personal experience. My wife and I recently had a baby girl, and I began to explore whether I could establish a Roth IRA for her benefit. As you know, starting investing early is crucial so that the benefits of compound interest can accrue. I discovered that under current law, an individual only can contribute up to the lesser of $2,000 per year (subject to compensation-based caps) or the amount of that individual's earned income. Under this rule, I cannot establish a Roth IRA for my daughter. This strikes me as an odd result. As a matter of policy, I think it would be prudent to allow and even encourage parents and their children to start saving for retirement as early as possible. Moreover, because a parent would be contributing after-tax dollars, the United States would not lose any current tax income. It is also odd because under current tax rules, a parent can immediately establish an Education IRA for a child. A parent also can save on a child's behalf in various state-sponsored college tuition plans, which offer the same combination of investing after-tax dollars in return for tax-free growth and withdrawals that is provided by a Roth IRA. I suggest that saving for retirement is just as important as saving for college, and that a parent should be able to establish a Roth IRA immediately for a child. I hope that you will find this suggestion helpful. Given your expertise in this area, it may well be that you already have considered it. Regardless, in light of the bill currently moving through Congress that would raise contribution limits on IRAs and 401(k)s, it seems a particularly appropriate time to consider the idea. Thank you again for all your hard work. You can count on my support. Sincerely yours,
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