In the past couple of weeks, we covered inheriting an IRA and passing on a 529 plan to future generations, both considerations for managing wealth across generations.
This week, we explore another great way to build wealth for future generations.
🧠 What you need to know
You may find it hard to believe that a child can have an IRA or Roth IRA account. While technically retirement accounts, you can withdraw some of the funds well before retirement without penalty.
To contribute, your child needs to be generating an income, whether that is a YouTube side hustle, lifeguarding, or a babysitting gig.
Given their likely low income, they may find it particularly advantageous to contribute to a Roth IRA vs. a Traditional IRA.
Key benefits of a Roth IRA
Tax-free growth forever: Contributions to a Roth IRA are made with after-tax dollars, so the earnings grow tax-free, and qualified withdrawals in retirement are also tax-free. Starting early means their contributions compound for longer, letting time do the work for them.
Withdraw Roth contributions without penalty: If your child is hesitant to contribute their earnings, they can always access the contributions tax-free for future purchases. While they wait, their contributions can generate gains that are completely tax-free. Gains on the contributions, however, cannot be withdrawn without paying a penalty.
Check out our prior writing on the types of assets that are well suited for these accounts.
🤝 How can Mezzi help?
Mezzi is here to help you and your family build generational wealth.
Collaborate with family members
Invite family members, share assets, and collaborate so you're all on the same page.
What’s yours and what’s for your kids?
Mezzi’s Account Tags help you analyze each family member’s assets as one portfolio. If you have a Roth IRA, custodial account and 529 plan for one child, you can view them separately or as one portfolio.
Keep risk in check
Use Mezzi’s performance and allocation comparisons to determine if you’ve properly diversified.
How else can we help you build wealth? Reply to this email and let us know.
