A Roth IRA for a child's financial future

If a child earns money, they can contribute to a Roth IRA up to their earnings, or $6,500, whichever is less.

They might not make enough to contribute themselves, but if the family has the money a single person can give a child $17,000 or $34,000 for a couple. Which is way less than the Roth contribution limit.

$6,500 invested in the S&P for 10-20 years would hopefully be a big help financially after their parents are gone.

I know this doesn’t have the advantage of shielding SSI/SSDI, as an ABLE account would, but the person would have easy access to their money (assuming they can manage it) and the S&P returns over the long run should be far more than SSI payments.

I’m just beginning to learn about long-term financial planning for a family member and don’t know a whole lot. Please weigh in if you’ve been working on this.

It’s certainly good to consider these questions earlier rather than later, however you may be better served running them by a financial and/or estate planner. In my brother’s case, estate planners were helpful in setting up a trust and making sure he earned enough to qualify for social security by hiring him themselves and paying his FICA taxes, because he wasn’t employable in a traditional sense.

I’m not sure if my father did it for him, but early on he would gift me money at tax season to contribute to traditional and later ROTH IRAs. After a while this stopped, I guess because he assumed I was to a point where I could take care of myself. It may be he didn’t trust my brother enough with the money, because that’s a big “IF” in this kind of plan. The IRA contribution limits were much lower at the time, however, and I started earning enough to hit the phase-out schedule anyway.

I believe all inherited IRAs are subject now to the 10 year rule, but I don’t believe RMDs apply to non inherited IRAs. Given this and the tax expense of ROTH conversions down the road, your plan sounds advantageous. But then again I’m not a financial planner, and know very little about ABLE accounts. I know I wish I’d started out with a planner sooner, as it’s saved me a lot of worries and allowed me to retire early. You can engage them for a flat or hourly fee as well as in a fiduciary capacity, with an option to take their advice and implement it yourself.

Strike that. I just read today that the SECURE 2.0 act has a class of beneficiaries called eligible designated beneficiaries who are exempt from the 10 year rule and get their RMDs based on their life expectancy, not the person they inherited funds from. This includes disabled individuals and chronically ill individuals.

I feel this further underscores the importance of seeking the advice of professional estate and financial planners.

I’ve researched a little bit about how the government defines “disabled”. This is how the SSA defines it: https://www.ssa.gov/disability/professionals/bluebook/12.00-MentalDisorders-Adult.htm

This is the Schizophrenia spectrum and other psychotic disorders section. It points to this other section:


  1. The criterion in C2 is satisfied when the evidence shows that, despite your diminished symptoms and signs, you have achieved only marginal adjustment. “Marginal adjustment” means that your adaptation to the requirements of daily life is fragile; that is, you have minimal capacity to adapt to changes in your environment or to demands that are not already part of your daily life. We will consider that you have achieved only marginal adjustment when the evidence shows that changes or increased demands have led to exacerbation of your symptoms and signs and to deterioration in your functioning; for example, you have become unable to function outside of your home or a more restrictive setting, without substantial psychosocial supports (see 12.00D). Such deterioration may have necessitated a significant change in medication or other treatment. Similarly, because of the nature of your mental disorder, evidence may document episodes of deterioration that have required you to be hospitalized or absent from work, making it difficult for you to sustain work activity over time.
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