As summer progresses, teenagers everywhere are working at part-time or full-time summer jobs.  Some are saving for college, some are paying for a car, and others are using the income to enjoy the summer months with their friends.  Very few are using that money to save for the future.  This does present a great planning opportunity for parents and others to help those teens get ahead down the road.

Anyone with earned income can contribute to an IRA or Roth IRA, so this includes teenagers.  Even if the teen isn’t interested in using their income to fund either of these accounts, a parent, grandparent, or really anyone else, can do so for them, up to the lesser of the teen’s earned income or the IRA contribution limits ($5,500 for 2013).

Using a traditional IRA will allow the teen to take out money penalty free for the big, important items in life, like paying for college or paying for up to $10,000 of a first home.  Or, if the contributions are allowed to grow in the account over their lifetime, the IRA can provide a significant retirement asset when the time comes.  Though the teen might not appreciate the value of this type of planning now, the impact will be felt and genuinely appreciated as they continue into adulthood.

As always, we’re here to discuss these and many other options, as we have been for more than 35 years.