Question: Can a minor child contribute to an individual retirement account?
Answer: Yes, a minor can contribute to an IRA if she has taxable compensation. The IRA contribution limit for those aged 50 or under in 2020 is the lesser of $6,000 or 100% of compensation. As long as the minor child has taxable compensation, it can be used as a means for an IRA contribution. This is true even if the actual contribution is funded by someone else.
For example, Kelsey is 14 and is working part-time as a lifeguard. She earns $2,000 in taxable compensation. Her IRA contribution limit for 2020 is $2,000, (the lesser of the yearly contribution limit ($6,000 or her taxable compensation $2,000). Kelsey’s mom ops to match her contribution so Kelsey contributes $1,000 to a Roth IRA and her mom contributes the same. Combined, she can fully fund the IRA for the year up to the legal limit.
Comment: When it comes to saving for retirement, sooner is better than later. Young people have the advantage of time with many years until retirement for money to grow.
SUBSCRIBE TO THE WEEKLY SCENARIO
ABOUT STEVE SHANE
sshane@offitkurman.com | 301.575.0313
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts, and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing full-service law firms in the United States. With 14 offices in seven states, and the District of Columbia, and growing by 50% in two years through expansions in New York City and Charlotte, North Carolina, Offit Kurman is well-positioned to meet the legal needs of dynamic businesses and the individuals who own and operate them. For over 30 years, we’ve represented privately held companies and families of wealth throughout their business life cycles.
Whatever and wherever your industry, Offit Kurman is the better way to protect your business, preserve your family’s wealth, and resolve your most challenging legal conflicts. At Offit Kurman, we distinguish ourselves by the quality and breadth of our legal services—as well as our unique operational structure, which encourages a culture of collaboration and entrepreneurialism. The same approach that makes our firm attractive to legal practitioners also gives clients access to experienced counsel in every area of the law.
Find out why Offit Kurman is The Better Way to protect your business, your assets and your family by connecting via our Blog, Facebook, Twitter, Instagram, YouTube, and LinkedIn pages. You can also sign up to receive LawMatters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
