The Secret Way Blue Ivy Makes Money Tax-Free
Mrs. Dow Jones here, the Zillennial Finance Expert. We're diving into a topic that might surprise you – retirement savings for kids. From Blue Ivy dancing on the Renaissance tour to North West modeling for Skims, these kids are turning their income into tax-free millions. Let's break down how your kids can do the same!
Blue Ivy: From Stage to Roth IRA
Blue Ivy has been stealing the spotlight as Beyoncé's backup dancer on the Renaissance tour. But here's the kicker – her parents, Beyoncé and Jay Z, are turning her hard-earned paychecks into $6 million tax-free dollars in retirement. Yes, you read that right. And you might be wondering, "How can the kids in my life grow tax-free wealth too?" Well, let me spill the tea.
Step One: Get the Child a Job
To start building tax-free wealth for kids, you need a job for them. Whether it's scooping ice cream, caddying at a golf course, or even working in your own business, creating a paper trail is essential. Beyoncé and Jay Z nailed this by hiring Blue Ivy as early as her baby days.
Step Two: Open a Custodial Roth IRA
Now, this is where the magic happens. Open a Custodial Roth IRA – a special retirement account for minors. It works like a regular Roth IRA, with contributions growing tax-free and withdrawals in retirement being tax-free. Beyoncé and Jay Z set this up for Blue Ivy, and you can too.
Step Three: Fund & Invest the Account
Max out the contribution limit for custodial Roth IRAs, which is $6,500 in 2023. Invest the money inside, and I recommend low-cost index funds tracking the S&P 500 for that historic 8% annual return.
Step Four: Be Consistent
Imagine if Blue Ivy contributes the max of $6,500 per year to her custodial Roth from age 0 to 18. With that 8% return, she could have $6.16 million tax-free dollars by age 59.5, having only put in $117k. Talk about building generational wealth!
North West: From Skims to Roth IRAs
Now, let's shift our focus to Kim Kardashian's daughter, North West. Kim knows the game too, and she's utilizing a custodial Roth IRA for North's future wealth.
Start a Custodial Roth IRA
By starting a Roth IRA early, your child has the potential to accrue significant wealth over time through compounded interest and tax-free withdrawals in retirement. Kim Kardashian reportedly opened a custodial Roth IRA for North, a powerful move to give her a head start on her financial future.
Teach Financial Skills
Hiring your child as an employee not only saves on taxes but also teaches them invaluable financial skills. They learn about hard work, responsibility, and financial literacy, setting the foundation for a financially savvy future.
Compound Interest Magic
If you contribute $1,000 per year to a Roth IRA for your child from age 8 to 18, with an average annual return of 7%, the account could be worth over $21,000 by age 18. And if left invested until retirement at 65, it could soar to over $300,000.
Conclusion: Your Child's Financial Future
So, there you have it. Roth IRAs aren't just for adults; they're for kids too. Whether it's Blue Ivy dancing on stage or North West modeling, these kids are securing their financial futures with tax-free wealth. Consider hiring your child, starting a custodial Roth IRA, and watch that compound interest work its magic. How are you going to help your child become rich?
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Sources:
- IRS guidelines on employing children in a family business: IRS Family Help
- Information on custodial Roth IRAs: Investopedia - Custodial Roth IRA
- North West's inclusion in Rolling Stone's list of top creators: Rolling Stone - North West
