How to Jump-Start Your Kids’ Retirement Savings
Helping your kids fund a Roth IRA can both get them started early on saving for retirement and show them the importance of saving early and often.


I want to share a strategy that can help your children get a huge jump start on their retirement. Many clients I work with wish they’d started saving at a much younger age, and they worry their children may make the same mistakes. So, many of them hope to teach their children how to manage their own money.
One of the most important lessons to teach is how important it is to save. Most people don’t realize how much they need to save for retirement. For instance, using a common 4% sustainable withdrawal rate in retirement, you’d need to save $1 million by retirement in order to have $40,000 of sustainable annual income in retirement.
That savings goal can feel pretty daunting, especially for younger people. But the biggest advantage young people have when it comes to retirement is that they have a lot of time for their savings to grow. The earlier they start saving and investing, the more wealth they’ll build.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But let’s get real… I’ve yet to meet the teen who is thinking about their retirement. A simple strategy that parents can implement to jump start their children’s retirement savings is to help them fund a Roth IRA.
Say your kid earns $3,000 from a job in 2023. If the income is W-2, they can contribute 100% of their earned income up to $6,500 to a Roth IRA, or $3,000. If income is 1099, the contribution limit is reduced by 7.65% (half of the self-employment tax) or $229.50 and can contribute $2,770.50 to the Roth IRA.
They probably won’t have the cash to make contributions themselves (even if they wanted to), but this is where parents can step in by giving them a tax-free cash gift (up to $17,000 per person for 2023) that can be used to fund the Roth IRA. In most states, if the child is a minor, you’d have to start with a minor Roth IRA where the parent is the custodian of the account, and then you can convert the account to a regular Roth IRA owned by the child once they are legally an adult.
How big an impact can this have on your kids’ lives? Assume they contribute $3,000 a year as a high school junior and senior, and $6,000 a year during all four years of college (so $30,000 in total contributions). If they earn a 6.8% annual return from ages 16 to 40, 6.4% from ages 41 to 60 and 6.1% after age 60 (the expected returns from 80% stock, 70% stock and 60% stock allocations, respectively), they’d have more than $600,000 of tax-free retirement savings by age 65, which could yield more than $21,000 of sustainable tax-free income throughout retirement.
* For simplicity, invested accounts assume following: 80% stock allocation from ages 16 to 40 earning 6.8% annually net of fees, 70% stock allocation from ages 41-60 earning 6.4% annually net of fees, 60% stock allocation after age 60 earning 6.1% annually net of fees. All numbers shown are in future dollars and net of 1% advisory fee. ** Sustainable annual retirement income assumes 4% annual withdrawal rate.
In addition, this creates an opportunity to teach your kids some basic investing concepts, such as what retirement accounts are and the time value of money. Hopefully, they’ll become accustomed to the annual contributions and carry those good habits forward into their adult lives.
That’s a legacy you can be proud of.
related content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

David McClellan is a partner with Forum Financial Management, LP, a Registered Investment Adviser that manages more than $7 billion in client assets. He is also VP and Head of Wealth Management Solutions at AiVante, a technology company that uses artificial intelligence to predict lifetime medical expenses. Previously David spent nearly 15 years in executive roles with Morningstar (where he designed retirement income planning software) and Pershing. David is based in Austin, Texas, but works with clients nationwide. His practice focuses on financial life coaching and retirement planning. He frequently helps clients assess and defuse retirement tax bombs.
-
Get Netflix, Hulu and Apple TV Plus for Free by Joining T-Mobile
T-Mobile customers save up to $35/month on streaming services thanks to this Netflix, Hulu and Apple TV Plus bundle. Here’s how to get it.
By Rachael Green
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax Refunds
Tax Refunds Some folks don’t file taxes simply because they don’t earn enough, but they could be missing out on a significant tax refund.
By Gabriella Cruz-Martínez
-
Going to College? How to Navigate the Financial Planning
College decisions this year seem even more complex than usual, including determining whether a school is a 'financial fit.' Here's how to find your way.
By Chris Ebeling
-
Financial Steps After a Loved One's Alzheimer's Diagnosis
It's important to move fast on legal safeguards, estate planning and more while your loved one still has the capacity to make decisions.
By Thomas C. West, CLU®, ChFC®, AIF®
-
How Soon Can You Walk Away After Selling Your Business?
You may earn more money from the sale of your business if you stay to help with the transition to new management. The question is, do you need to?
By Evan T. Beach, CFP®, AWMA®
-
Two Don'ts and Four Dos During Trump's Trade War
The financial rules have changed now that tariffs have disrupted the markets and created economic uncertainty. What can you do? (And what shouldn't you do?)
By Maggie Kulyk, CRPC®, CSRIC™
-
I'm Single, With No Kids: Why Do I Need an Estate Plan?
Unless you have a plan in place, guess who might be making all the decisions about your prized possessions, or even your health care: a court.
By Cynthia Pruemm, Investment Adviser Representative
-
Most Investors Aren't as Diversified as They Think: Are You?
You could be facing a surprisingly dangerous amount of concentration risk without realizing it. Fixing that problem starts with knowing exactly what you own.
By Scott Noble, CPA/PFS
-
Will My Children Inherit Too Much?
If you worry about how your children will handle an inheritance, you're not alone. Luckily, you have options — from lifetime gifting to trusts — that can help.
By Mallon FitzPatrick, CFP®, AEP®, CLU®
-
Charitable Giving Lessons From Netflix's 'Apple Cider Vinegar'
Charity fraud is rife, and a Netflix series provides a timely warning about donating money to a good cause without looking into its background.
By Peter J. Klein, CFA®, CAP®, CSRIC®, CRPS®