Posted on March 16, 2005 at 16:49:19:
Teenagers tend to spend what they earn, and few will be concerned about their retirement needs 60 years hence. But any youngster who earns money, from babysitting, mowing lawns or tutoring younger teens for tests or a bar mitzvah, can open a Roth IRA.
Even if Junior can’t see the point of saving, his parents or grandparents can—and there’s no rule about whose money goes into the Roth. Some parents offer to match their child’s contributions dollar for dollar—even two for one—while others underwrite the Roth completely.
The 2004 contribution limit is 100 percent of earnings or $3,000, whichever is less, for those under 50. An account can be opened up to April 15. Even one year’s contribution can grow immensely when compounded; a $3,000 pay-in for a 16-year-old, growing 7 percent a year, would be worth $82,000 at age 65, $115,000 at 70. Earnings are tax-free forever.