What to know about opening a custodial Roth IRA for a child
Help Your Children & Grand Children Start Saving for Retirement
Parents and Grandparents, you can help your children under the age of 18 start saving for retirement by setting up a custodial Roth IRA. To be eligible, your child needs to earn income. It doesn't matter if they're working for an employer, you, a grandparent, or providing services like babysitting. As long as the child is making money, they can contribute to a custodial Roth IRA.
For 2025, the contribution limit for custodial Roth IRAs is $7,000 or the total amount of money your child made during the year, whichever is less. For example, if your child made $2,000 babysitting or doing yard work, they could contribute up to $2,000 to their custodial Roth IRA this year. If they made $8,000, they would be able to contribute up to $7,000.
If your child contributes from age 9 to 18, their principal invested would be $20,000. By investing $166.67 monthly to dollar cost average at 7% interest over 10 years, they would have $28,840.16.
Now, if they keep that money invested from age 19 to 65 and earn an 8% interest rate, which is conservative over a 47-year period, they could have $1,205,568.88 by age 65.
What to know about opening a custodial Roth IRA for a child: https://www.thrivent.com/insights/investing/custodial-roth-ira-for-a-child
Consider Life Insurance for Your Children
There may be benefits to considering the purchase of life insurance for your children or grandchildren. One major consideration is that the cost of insurance will likely never be lower than when the insured is younger and in good health. There is also a chance that the insured may become unable to purchase life insurance in post-childhood years due to health changes that could occur during adolescence or young adulthood.
To learn more, go to How variable universal life insurance work: Features, pros & cons: https://www.thrivent.com/insights/life-insurance/how-variable-universal-life-insurance-works-features-pros-cons [or other I&G article cited above]
For more information on either custodial Roth IRAs or variable universal life insurance, please give me a call. There is no cost or obligation just to talk.
Kevin Schaeuble
Financial Advisor
712-378-8505
See thrivent.com/social for important disclosure information.
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