Why Summer is the Perfect Time to Open a Roth IRA for Young Earners

By Morgan Weil, CFP^®
Senior Wealth Manager & Financial Advisor, RJFS

Kickstart Their Future: Why Summer is the Perfect Time to Open a Roth IRA for Young Earners
Summer break is here—and for many teens and young adults, that means the start of a summer job or internship. While that first paycheck is exciting, it also opens the door to something even more rewarding: laying the foundation for lifelong financial security.

One of the smartest moves a young earner can make? Opening a Roth IRA.

Why a Roth IRA is a Smart Choice for Young People
A Roth IRA is more than just a retirement account—it’s a tool that combines tax advantages, flexibility, and long-term growth potential, making it especially ideal for young savers.

Key Benefits:

• Tax-Free Growth: Contributions are made with after-tax dollars, and qualified withdrawals—including earnings—are tax-free.
• Flexible Access to Contributions: Contributions (not earnings) can be withdrawn anytime, for any reason, without taxes or penalties.
• Penalty-Free Access to Earnings for Certain Needs, including:
  • Qualified education expenses
  • First-time home purchase (up to $10,000)
  • Disability
  • Emergency medical costs
  • Health insurance during unemployment

This flexibility makes a Roth IRA a powerful financial tool for young workers who might need future access to funds—while still building retirement savings.

What to Know Before You Start

Eligibility & Contributions
To contribute, your child must have earned income. For 2024, the maximum contribution is $7,000 or the total amount earned—whichever is less. If they're under your state’s age of majority, you can open and manage a custodial Roth IRA on their behalf.

Rules for Tax-Free Withdrawals

• To withdraw earnings tax- and penalty-free, the account must be open for five years, and the account holder must be 59½ or meet a qualifying exception.
• Unlike traditional IRAs, Roth IRAs do not require minimum distributions during the owner’s lifetime.

Bonus Tip: The W-4 Form and Tax Withholding
If your child earns less than $14,600 in 2024, they may be able to claim “Exempt” from federal income tax withholding on Line 4(c) of Form W-4.

Why This Matters:

• The standard deduction for single filers in 2024 is $14,600.
• If their income falls below that, they likely owe no federal income tax.
• Claiming “Exempt” avoids unnecessary tax withholding—helping them keep more of their paycheck now.

Note: This exemption only applies to federal income tax. Social Security and Medicare taxes will still be withheld. If income increases during the year, they may need to update their W-4.

Start Their Financial Journey Off Right
Helping your child or grandchild open a Roth IRA is a powerful way to teach them about saving, investing, and preparing for the future—while taking advantage of their greatest asset: time.
If you’d like help getting started or have questions about tax forms, we’re here to assist. And feel free to share this guide with other families who might benefit!

Any opinions are those of Morgan Weil and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional.