Frequent topics that arise in discussions with clients about retirement planning are where to invest and in what to invest. This article will discuss the versatile Roth IRA, which can be used by traditional and nontraditional savers. It only has been around since 1997, so some clients may not be as familiar with this option, especially the elderly, who might find it an ideal vehicle to save for their children and grandchildren.

Other nontraditional savers who may find a Roth IRA to be a beneficial option for saving and retirement planning include youth who earn income, self-employed individuals, and spouses who do not work outside the home.

A spouse who does not work outside the home has the ability to participate in a Roth IRA. Benefits of contributing to a Roth for the spouse are many. Some spouses who do not work outside the home say having a retirement plan of their own can help them to feel valued. Watching their own investment grow over the years helps them feel secure in retirement planning. Depending on taxable income, a couple may qualify for the Saver’s Credit which allows them to save up to $2,000 or $4,000 if married filing jointly. That can be a real incentive in helping couples determine if this is an option they want to use to save for retirement or other future needs. Couples also may use this savings to fund the down payment on a house since contributions can be returned any time, regardless of age. Some couples choose to use this as a way to save for big purchases, and still allow their earnings to continue to grow until retirement age.

There is a lot to think about when working with clients who may have the ability to save money by using a Roth IRA.

Children with a summer job or any job during the school year such as babysitting, pet sitting, or cutting grass can contribute that earned income into a Roth IRA to get a jump start on retirement savings and establish a lifelong retirement saving habit. There is no age minimum to open up a Roth IRA, even babies who model can earn income, which is all that is necessary to fund a Roth. It is not necessary for a child to receive a w-2, a 1099 misc., or any other proof of income to be able to fund a Roth. All that is necessary is that they actually earn income and can document it. While filing an income tax return is not necessary unless their income meets the minimum mandatory threshold, doing so creates a paper trail and is recommended. While income over $400 a year from self-employment triggers self-employment tax liability, children under 18 who earn income from jobs such as babysitting and yard work are household employees and are not considered self-employed.

Although the rules for this next group of savers lend themselves to their own article, it’s important to take note of options for self-employed individuals. They may participate in different types of retirement savings accounts to help to reduce their taxable income, but they also can participate in saving with a Roth, called a simplified employee pension plan IRA (SEP). There are some different ways to look at the tax implications and benefits of using a Roth as a self-employed individual. A benefit to saving with a Roth is that it is not subject to required minimum distributions
(RMD), an important benefit if the money in retirement. Another benefit is that the entire balance, both earnings and contributions withdrawn after 59.5 years of age is not taxed. Some self-employed individuals may have a lower taxable income in the beginning years of their saving, as opposed to when they are ready to take distributions. Some may even qualify for the Savers Credit depending on their taxable income. This could save them 10–50 percent more on up to $2,000 for an individual, or $4,000 for couples.

The last non-traditional individual who can benefit from saving with a Roth IRA is a retiree. Some retirees work part time during retirement to provide meaningful activity and also to save. Since a Roth can continue to be funded after 70 years old, retirees can use this as a way to put money aside and continue to grow tax-free. If they are receiving money from other retirement accounts and Social Security, they may want to save money for other uses. A benefit for retired individuals is that money saved in a Roth IRA can be left to beneficiaries with
no tax liability after the death of the retiree. This can be a great way for parents and grandparents to leave money to their heirs with no tax consequences. Another benefit is that it allows a retired individual who may want to save more for their later years to continue to grow their savings. This may help them feel more secure should they outlive their current financial plan for retirement. A retiree, depending on their income in retirement, may also qualify for the Saver’s Credit.

A Roth IRA is a wise investment vehicle for these types of non-traditional savers. So whether the Roth IRA is being used to save the invested money for college for a child; a big purchase like a home; saving for retirement without tax implications; or to pass on to heirs, there is a lot to think about when working with clients who may have the ability to save money by using a Roth IRA as an investment for the future. Practitioners should take the time to research the topic of saving with a Roth IRA for all clients, even non-traditional savers.


Jennifer Lear, JD, AFC®, is an Army spouse currently residing in Fort Knox, KY. She works for Zeiders Enterprises, Inc. as an on-demand Personal Financial Counselor and for Military One Source providing individual financial counseling to eligible servicemembers and their families. She can be reached at

Andi Wrenn, MA, AFC®, lives outside Raleigh, NC. When she isn’t working with the network of financial professionals she manages at Zeiders Enterprises, Inc., she volunteers with couples and individuals providing counseling and coaching.She can be reached at

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