I’m a wealth expert – I’ll show you how to start saving millions of dollars in retirement before your kids turn 18
- Personal finance expert reveals how parents can start saving for retirement for their children
- Hailey Sachs advises followers to invest kids’ money in custodial Ross IRA
- Tax-friendly accounts help kids save millions of dollars worth of retirement savings
Personal finance experts have revealed how parents can create wealth for their children from an early age.
In a viral video post, Hailey Sachs advised her 659,000 followers to invest their money in a tax-friendly retirement account, the Custodial Ross IRA.
There is one problem though. Your child must have some income to be eligible for an account.
Sachs, who describes herself as a “once-in-a-century financial expert” and “Mrs. Dow Jones,” cited Beyoncé and Jay-Z’s 11-year-old daughter, Blue Ivy, as an example. She used to be a backup dancer for her mother. Her crying also appeared in her father’s song “Glory” when she was two days old.
If Ivy donates $6,500 a year to the Custodian Ross IRA from ages 0 to 18, she will end up with $6.1 million in tax-exempt wealth by age 59.5. This is despite the fact that she was only able to donate $117,000 out of her own money.
Hailey Sachs advised her followers to invest their money in a tax-friendly retirement account, the Custodial Ross IRA.
This analysis assumes that funds will benefit from compound growth at an annual return on investment of 8% each year.
“These tax-advantaged retirement accounts are perfect for increasing the wealth of your children,” Sachs wrote in the post.
“The only problem is that the child needs to earn an income to be eligible. You cannot finance it yourself.”
“But if you have your own business, you can make it an employee. That’s what Jay-Z and Beyoncé did!
A Custodial Roth IRA is a new way to save for retirement before your child turns 18.
They must have some sort of “earned income”, but as long as they pay taxes, that goes for providing services like babysitting or selling lemonade.
Sachs, who calls herself ‘Mrs. Dow Jones’, has amassed 659,000 Instagram followers for her personal finance advice
The Parent Roth IRA contribution limit is $6,500 or the total amount your child earned during the year, whichever is less.
Such accounts are funded in after-tax dollars, so if a child chooses to withdraw upon retirement, the child will not pay any income.
The biggest benefit of letting kids start saving early is that they benefit from higher compounded growth.
Compound interest growth is the process of earning interest by adding accrued interest to the money you initially put aside.
For example, a $10,000 investment with a 10% annual return will be $11,000 after a year. The following year, instead of the original amount he applied 10 percent interest on $11,000.