I was thinking that she could withdraw the money if she needed for college at 18, or when she wanted to buy a house in her mid 20s or 30s. It's penalty free for those cases, isn't it?
2006-08-24 09:43:22 · 4 answers · asked by snowraider 3 in Business & Finance ➔ Investing
NO ...A Roth IRA is NOT the financial tool you want.
She must have earned income each year to set up any IRA.
What will work is a Cloverdale Education Savings Account (ESA).
-this EAS pays qualified edu. expenses of a designated beneficiary... your niece.
-SHE must be under 18 yrs old to start it.
-you must make less than $110,000 or$ 220,000 if married.
-tax free distributions if not more than adjusted qualified edu. exp.
will pay for school.
-you cannot put in more than $2,000 per year.
These contributions are not deductable however the amounts deposited grow tax free until dispersed.
See Pub 970 at the link below...
good luck
-
2006-08-24 15:45:43 · answer #1 · answered by awaken_now 5 · 1⤊ 0⤋
for the house, 10000 without tax or penalty free on the Roth IRA.
For college, your contribution or her contribution for education is tax free, except the earning is taxable
It is always good idea open the Roth IRA for your niece, teach her how to invest and save early will make her wealthy should be a good thing in turn she can help other people in her life
2006-08-24 20:09:24 · answer #2 · answered by Hoa N 6 · 1⤊ 0⤋
I can tell you that it would be a penalty free disbursement if she makes a withdrawal to pay for qualified first-time home buyer's expenses. Otherwise, any IRA is just what the acronym stands for - "Individual Retirement Account." Not being an adult, is she even eligible to open one? I would recommend just speaking to your bank and setting up a savings account. You can set it up and leave it in your name until she reaches an age for these uses. Or, have the account set up in her name and have the bank restrict it so that she can't touch it until she is 18 or 21. I don't know what her age is now, but if you have enough time and money to contribute more to an IRA for her than she can use to "pay qualified first-time home buyer's expense" then that is money she will either be penalized for or not be able to touch until she retires.
2006-08-24 17:13:51 · answer #3 · answered by longhairchic 1 · 0⤊ 0⤋
Note, you/she can contribute to the account only up to the amount of earned income she has. If she doesn't have a job, no money can be contributed that year.
Investment gains, interest, dividends don't count.
2006-08-24 20:20:54 · answer #4 · answered by Peter C 2 · 1⤊ 0⤋