Q. My adult children have Roth IRAs to which I am associated as an unauthorized user. Is there a problem that they can deposit directly into their Roth IRA accounts, and if not, is there an annual maximum they can deposit? My wife and I are retired with retirement income.
– Caring Dad
A. It is very generous of you to want to help your children save for retirement.
Although there are no explicit restrictions for you as a parent contributing to your child Roth IRA, being an unauthorized user can complicate the mechanics of the actual act a bit.
Let’s start from the beginning.
A taxpayer can pay IRAs less than $ 6,000 to $ 7,000 annually for 2021 if they are over 50 – or realized income for the year, said J. David Principe, a certified financial planner with SAGEbroadview Wealth Management in Morristown.
He said taxpayers must be suitable for Roth to make contributions for the year, which means that their modified adjusted gross income (MAGI) must be below certain thresholds. For individual taxpayers, MAGI must be less than $ 140,000, and those who are married and jointly file taxpayers must have MAGI less than $ 208,000, he said.
Contributions must be paid by April 15 next year at the latest, he said.
“As an unauthorized user, it seems unlikely that you will be able to make a direct deposit to your children’s Roth IRA accounts,” Principe said. “However, a number of less direct methods are available.”
He said that you can send a check directly to the financial institution and it will pay the funds into your child’s IRA. You should review the caregiver’s instructions on how to prepare the check and where to send it.
You can also safely deposit funds through a mobile guardian deposit tool, he said.
Another option is to give the money directly to your children, and she could earn it IRA deposit myself.
It is important to note that you can donate $ 15,000 a year per recipient, or $ 30,000 if it is a joint gift with your spouse, without having to file a gift tax return, he said.
You must be aware of this rule if you intend to give your children other gifts for the same tax year, in addition to contributing to their Roth IRA.
Either way, make sure your children are eligible to contribute and have not planned their own contributions, which could inadvertently exceed them.
Email your questions [email protected].
Karin Price Mueller writes Bamboozled column for NJ Advance Media and is the founder NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly e-newsletter.
