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Financial Professional
Prudential Advisors
236 Broadway
Menands, NY 12204
Phone: 800-243-5334
Fax: 800-720-0780
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Website: letstalkfinancialwellness.com
January/February 2025
A Roth IRA For Your Child
You might think individual retirement accounts (IRAs) are only for adults, but a Roth IRA can be a smart way to give your child a head start in building wealth.
Let's Talk Basics
Current tax law allows earnings on Roth IRA investments to potentially grow tax-free and can thus be withdrawn at age 59-1/2 or older with no tax consequences or penalties. Unlike other retirement accounts, a Roth IRA allows contributions (but not earnings) to be withdrawn penalty-free at any time. This can be incredibly valuable when funding future education or a first home purchase.Logistics
As a parent, grandparent, or legal guardian, you can open a custodial Roth IRA on behalf of a child and manage the account until the child reaches the age of majority (generally 18). If you wish, you can also make the annual contributions on the child's behalf, up to certain limits, leaving the child's earned income with them.You may invest as much as the Roth IRA annual contribution limit or the child's earned income for the year if less. Thanks to the annual gift tax exclusion, which is $19,000 for 2025, your gift contributions should be gift—and estate-tax-free. These amounts change annually.
A Teaching Tool
Opening a Roth IRA for your child is also a powerful way to teach them the importance of investing and saving for the future. By involving them in the process and explaining how their contributions can grow over time, you're instilling valuable financial literacy skills that will serve them well in adulthood. It's an opportunity to start a conversation about long-term financial planning and set them on the path to financial independence from an early age.If you're thinking about ways to invest in your child's future, consider talking with your trusted financial professional about the power of a Roth IRA. It's an investment that can truly make a difference.
A child's earned income for Roth IRA contributions can come from regular wages or self-employment, such as lawnmowing, babysitting, or even a lemonade stand.
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Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Securities products and services are offered through Pruco Securities, LLC (Pruco) (member SIPC). Prudential and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Prudential, the Prudential logo, and the Rock Symbol are service marks of Prudential Financial Inc., and its related entities, registered in many jurisdictions worldwide. Prudential Advisors is a brand name of The Prudential Insurance Company of America and its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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