Financial News & Research
Index
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15 Midyear Tax Planning Moves You Can Make In ‘15
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6 Common Estate Planning Myths: Here’s The Reality
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7 Expired Tax Breaks That Were Given A Longer Life
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Add Up The Pluses And Minuses Of A Living Trust
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Do You Know What Kind Of Business Not To Open?
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Don’t Be Caught In The Web Of This Stealth Tax
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Have Your Child Kick Into A Roth With A Reward To Boot
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Here Are The Latest Tax Traps, Tips, And Tricks
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Keep Eyes On Estate Tax Proposals
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Live Long And Prosper: Roll Out A Stretch IRA
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Seven Steps After A Spouse's Sudden Death
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Should You Roll Over Or Play Dead? 7 Factors
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Wall Street's Anachronistic Ways In The Internet Age
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What Should You Do If An Employee Asks For A Loan?
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When Should Millennials Start Retirement Saving?
Industry News
Have Your Child Kick Into A Roth With A Reward To Boot
Suppose your teenage child lines up an after-school job and is raking in the money. Your progeny might have an eye on the latest X-Box or iPhone, but there are plenty of other ways to spend that hard-earned cash.
Crazy as it might sound, you could encourage your child to deposit some of the funds in a Roth IRA.
Why would a high school student contribute to a Roth? This is a good time to teach your child about the benefits of tax-advantaged accounts. If your 17-year-old puts away $5,500 each year (the current maximum) and receives a hypothetical 7% annual return, the stash will grow to a staggering $2,235,909 by the time he or she is ready to retire at age 67!
What's more, future distributions from a Roth may be 100% tax-free. Although you generally have to wait until age 59½ to qualify for this treatment, earlier distributions may be wholly or partially tax-free under certain circumstances.
Finally, if you want to take some, or all, of the sting out of the situation, you can give your teenager a cash gift for up to the amount of the Roth contribution. This is perfectly legal as long as the child has earnings from a job. Plus, there's no gift tax liability because the maximum IRA contribution is less than the $14,000 a year you can give without tax liability. Everybody wins.