July Topic of the Month: It’s Never Too Early to Save: Roth IRAs for Teens and College Students with Summer Jobs

Kevin Orsinger |

Are you a teen or college student working a summer job? We know how exciting it can be to get that paycheck and spend it on fun times with friends, new clothes, or other important purchases, but saving is also a key aspect of working that you should consider. Are you a parent who has a teen or college student with a summer job? Perhaps you have them put part of their check in a savings account every pay period; this is a great practice. However, it is never too early to start saving for retirement, and we encourage you to consider whether a Roth IRA might be a good fit for you or your child.

An IRA seems like something most people don’t think about until they’ve started their career, but the Roth IRA is a great savings vehicle for teens for many reasons. For example, a Roth IRA is not age restricted, meaning that anyone of any age can contribute so long as they have earned income. Of course, a parent or adult will need to open the custodial Roth IRA if the child is under 18, but this is a very flexible retirement about in which contributions can be withdrawn at any time without penalty, which can be advantageous should the funds be needed before reaching retirement age.

There are contribution limits to these accounts. In 2021, for people under the age of 50, the limit is $6,000 or the total of their earned income for the year, whichever number is lower. You can contribute to the IRA whether the money is earned in a W-2 job or from self-employment, like babysitting or dog walking. The benefit of starting an IRA so early is compound interest: the earlier you start saving, the more your money can grow. This means that even $20 out of every paycheck started during one’s first job will grow faster when invested in an IRA—this type of growth can’t happen in a savings account.

To determine whether a Roth IRA makes sense for you or your high school or college student, it is best to discuss the details and their function with your financial advisor. We at Orsinger Investment Group, Inc. invite you to call us at (724)588-9067 to schedule an appointment and have this conversation today! This summer might just be the perfect time to consider opening this account.