Is your child or grandchild working hard this summer? For a young person, a summer job can be a valuable experience. Whether it is making smoothies, serving tables, or being a camp counselor, a summer job can teach life skills and give a first opportunity to manage finances. An important part of managing finances is saving for the future. Why not help them open a ROTH as part of their summer job experience? They will get an early start on retirement savings while also learning how to save for the future.

Roth IRA Benefits

You may wonder whether a Traditional or Roth IRA would be the better choice for a young person who is just beginning to save for retirement. For younger people, many experts would say that a Roth IRA is more attractive than a Traditional IRA. Contributions to a Traditional IRA are deductible, but few young people will earn enough to benefit from deducting their Traditional IRA contributions. Roth IRA contributions are not deductible but offer tax-free earnings if certain rules are followed.

By opening a ROTH at a young age, your child or grandchild will have the important advantage of time. The earlier funds are contributed to a Roth IRA, the more potential there is for tax-free earnings to accumulate. There is no minimum age for establishing an IRA under the law. Some IRA custodians may have policies restricting IRAs for minors, but many others will allow these accounts to be established.

For younger people, retirement may seem a long way away. They may worry that they will need the funds sooner for something else. A Roth IRA alleviates these concerns. If they need access to their funds, your child or grandchild will be able to take a distribution of tax-year contributions at any time, for any reason, without tax or penalty. If you open a ROTH IRA and it remains open for five years, he or she will be able to take a tax-and-penalty-free distribution, including earnings, to purchase a first home.

Contribution Rules

An IRA contribution must be based on earned income or taxable compensation. Wages from a summer job would be considered taxable compensation. For 2023, the contribution is limited to the lesser of $6,500 or taxable compensation for the year. If your child or grandchild’s summer job earnings are less than $6,500, he or she would be limited to the amount earned. For example, if your daughter or granddaughter earned $2,000 this summer and had no other earnings for the year, she would be limited to contributing $2,000. You are not required to contribute the maximum amount for which you are eligible. Your daughter or granddaughter may decide she only wants to contribute $500. Any amount that is contributed to a Roth IRA is a good start!

Help Them Maximize Their Limit

A grandparent may also want to consider helping make an additional contribution. There is no requirement that the contribution be made from the wages earned by the young person. A grandparent could add the remaining $1,500 to the $500 already contributed to make the maximum Roth IRA contribution allowed for the year.


A summer job provides many benefits to a young person. A Roth IRA could be an important one. Starting a Roth IRA now with summer employment wages will enable your child or grandchild to begin saving early and learn valuable lessons about preparing for retirement and the future.


By Sarah Brenner, JD
Director of Retirement Education

Copyright © 2023, Ed Slott and Company, LLC Reprinted from The Slott Report, 2022, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Content posted in Ed Slott’s IRA Corner was developed and produced by Ed Slott & Co. to provide information on a topic that may be of interest. Ed Slott and Ed Slott & Co. are not affiliated with Ethos Capital Management, Inc. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.  The tax information provided is general in nature and should not be construed as legal or tax advice. Information is derived from sources deemed to be reliable. Always consult an attorney or tax professional regarding your specific legal, or tax situation. Tax rules and regulations are subject to change at any time. Ethos Capital Management, Inc. is a registered investment adviser. The firm only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.