No. of Recommendations: 0
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 Senate
104 Hart Senate Office Building
Washington D.C. 20510

Dear 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,

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.