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Fortunately, there’s still time to contribute to your child’s Roth IRA for 2020. The deadline to contribute to an individual retirement account is the same day that federal income tax returns are due. The IRS pushed the 2020 filing date from April 15, 2021 to May 17, 2021. This gives you a little more time to stash some cash away for your child’s future.
Make sure your kids qualify
One incredible benefit of a Roth IRA is that it’s open to savers of all ages. You just need to have earned income for the year to make a contribution. That’s easy for teenagers with after-school or summer jobs to get, but in some cases, even younger children can earn money that will allow them to qualify to contribute to a Roth IRA. Consult a tax professional to ensure that any income your child gets will count for Roth IRA contributions and that it’s documented and reported correctly.
In most cases, a child cannot open a Roth IRA in their name until they are 18. A parent, guardian or another adult can serve as a custodian and manage the account on the child’s behalf until they are eligible to manage their own account.
Although age is not a barrier, there’s another number that can stand in the way of your child’s Roth IRA goals: income. Every year, the IRS releases income limits. If your child earned too much money in 2020, they are not eligible to make direct contributions to a Roth IRA. Since most kids usually don’t have six-figure earnings, this won’t be much of a concern.