Look No Further For the Gift That Lasts
This time of year everyone is obsessed with thinking of creative, utilitarian gifts that still show love and caring. Interestingly, there is a unique and utilitarian gift we can give the kids in our lives: an IRA contribution.
Although this gift may be the least exciting one under the tree this year, in the years to come, it’s a gift your children will be grateful for as they approach adulthood. The Wall Street Journal published the following example: consider investing $2,000 each year for 5 years while your child is still young. That $10,000 could increase in value to $296,000 by the time he or she is 65, assuming a 7% annual rate of return.
That’s a tax-free income of almost $12,000 a year for 30 years.
Talk about a gift that keeps on giving!
It is a little-known fact that anyone can contribute to an IRA, regardless of age, within the limits set by the IRS- up to $5,500 (or maximum compensation, whichever is lower) for those under age 50.
Traditional IRA contributions are tax-deductible for young people, but, of course, their incomes are usually so low that it doesn’t matter much. Therefore, a Roth IRA is sometimes a good bet as it provides much more flexibility. Contributions can be withdrawn tax-free at any time, with no penalty after age 59 ½. There is a 10% penalty for withdrawals before age 59 ½, but may not apply if a penalty tax exception applies, such as qualified higher-education expenses and death distribution.
Since working teens want to spend most of their money on movies, video games, and the like, it is often a good opportunity to use Christmas as the time to stuff not only stockings but IRAs, with even just a little money. The payoff later can be huge.
Call iPlanGroup today at 855.604.7526 to give the Tax-Free gift that keeps on giving, a Roth IRA, to your loved ones this holiday season.