Kick-start Your Childs Financial Journey with Roth IRAs

Summer break is here, and many young people are stepping into summer jobs or internships. While earning a paycheck is exciting, it’s also a great opportunity to introduce them to smart financial habits—like opening a Roth IRA.

Starting a Roth IRA early can jump-start retirement savings and teach valuable lessons about saving, investing, and long-term wealth building.

Why a Roth IRA?

• Tax-free growth: Contributions are made with after-tax dollars, so qualified withdrawals in retirement are tax-free.
• Access to contributions anytime: Contributions (not earnings) can be withdrawn at any time, tax- and penalty-free.
• Flexible early withdrawal options: Earnings withdrawn before age 59½ and before the account has been open for five years may be taxed and penalized—unless used for:
  • Qualified education expenses 🎓
  • First-time home purchase (up to $10,000) 🏡
  • Disability ♿
  • Certain emergency expenses 🏥
  • Health insurance premiums while unemployed 🩺

2025 Roth IRA Contribution Rules

• Contribution limit: $7,000 (or total earned income, whichever is less)
• Eligibility: Must have earned income from a job.
• Parental management: Parents can open and manage the account until the child reaches the age of majority.

W-4 Tip for Young Workers

If your child expects to earn less than $14,600 in 2025, they may be able to write “Exempt” on line 4(c) of their Form W-4 to avoid federal income tax withholding.

• The standard deduction for single filers in 2025 is $14,600.
• Social Security and Medicare taxes will still apply.
• If their income or tax situation changes, they may owe taxes or face penalties.

If you’d like to explore opening a Roth IRA for your child or grandchild, we’d be happy to help! And if you know someone else who might benefit from this information, feel free to pass it along.

Wishing you and your family a wonderful start to the summer!

Changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors we are not qualified to render advice on tax or legal matters. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, allowable contribution may be reduced or eliminated if annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.