07/18/2025
🌟If you have or know a young person earning money this summer, you should share this with them!
For young adults, a Roth IRA can be a powerful retirement savings tool, but most don't understand how it works.
Here are 6 things to know:
1️⃣ You contribute after-tax dollars, and your money grows tax-free!
2️⃣ You don’t need a full-time job. Any earned income — even from a part-time or freelance job qualifies you to contribute.
3️⃣ Contribution limits are separate from your 401(k). In 2025, you can contribute up to $7,000 to a Roth IRA even if you’re also contributing to a 401(k).
4️⃣ You can withdraw contributions anytime. Unlike many retirement accounts, you can pull out the money you put in (not earnings) without taxes or penalties.
5️⃣ You can start small. Even $50 a month can make a big difference over time.
6️⃣ You could consider helping them get started by offering to “match” some of their money if they are interested in opening an account.
Key takeaways:
✅ Starting a Roth IRA early can give young investors a massive head start, offering flexibility, growth, and tax advantages few other accounts match.
✅ Once you turn 73, you must take the required minimum distribution from your 401(k). Withdrawals are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken before age 59½.
✅ With a Roth IRA, to qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances. The original Roth IRA owner is not required to take minimum annual withdrawals. With a Roth 401(k), employer matching with pre-tax dollars is not distributed tax-free during retirement.
