Consider this opportunity if a child or grandchild is toiling at a summer job: You can contribute to a Roth IRA for him or her…up to $5,500 for 2017, but not more than the child’s earnings. Inside the Roth, earnings grow tax-free. The payin counts toward your $14,000 gift tax exclusion ($28,000 if married).
This can provide a nice nest egg. And there are key tax advantages to Roths. All distributions made after age 59½ are nontaxable. Contributions can be pulled out free of tax at any time. And when the child is ready to buy his or her first home, $10,000 of earnings can be taken out tax-free. IRS Publication 590-B has more details.