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Tax Planning at 16?

If you have a child or grandchild that worked a summer job this year consider making a payment to a Roth IRA for them.  You are allowed to pay in to a Roth IRA for a child or grandchild to the lesser of $5,000 or the child’s earnings.  A $5,000 contribution to a 16-year-old’s Roth IRA that earns 8% interest a year will grow to $217,000 by age 65 and $319,000 by age 70.  The more years those contributions are made; the balance will be significantly larger.  For the parent or grandparent, this gift is non-taxable to the extent of the yearly $13,000 exclusion ($26,000 if your spouse concurs).  Start thinking ahead now, your child or grandchild will surely thank you for it later.

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