1.2 Million Tax Free

4 Aug 2023 · 1 min

Watch on YouTube

1:01

In this concise financial‑planning video, the speaker outlines a four‑step strategy for parents to give their child a substantial, tax‑free nest egg by age 65. The plan begins by opening a custodial Roth IRA (e.g., at Fidelity) when the child is around six years old. The child must earn at least $100 per month through employment or self‑employment (such as yard work, babysitting, etc.). The parent then matches that $100 each month, depositing a total of $200 monthly into the Roth account. Assuming a 7 % annual return, the account would grow to roughly $50 K by age 18 and, if left untouched, to about $1.2 million tax‑free by age 65. The speaker emphasizes the simplicity and long‑term tax advantage of this approach.

Chapters

With these 4 easy steps, you can provide your child with $1.2 million tax-free dollars when they turn 65. If you could ensure that your child had over $1 million available to them tax-free when they turn 65, wouldn't you do it? Well, here's how. This is for parents with young kids, and for this example, we'll say you're starting at age 6. You set up a custodial Roth IRA account. You can do this at Fidelity or some of the other brokerages. Next, if you have a family business, you hire them as an employee. If you don't have a business, find a way for them to make $100 a month doing self-employment work—cleaning up other people's yards, mowing, babysitting, raking leaves, whatever it is. $100 a month, $25 a week. You match that amount with another $100 and put it into the custodial Roth account every month. At age 18, that'll be around $50,000. Even if they never touch it again, at age 65, at 7%, that should be around $1.2 million available to them tax-free.