Roth IRA Could Be Called "The Greatest Gift Ever"
MIAMI (CBSMiami) - Parents do a lot for their kids but do you know how to make your teen a millionaire?
Richard Tiberius is an artist who lives in Coconut Grove.
The retired University of Miami professor works in his small studio with his daughter Kiry, who's following in her father's footsteps. While Kiry is 25-years-old and embarks on her own career as an artist, Dad still worries about his little girl.
"A parent is always protective of their offspring," said Tiberius. "I think there should be a turning point where they take care of you, but that hasn't happened to me yet."
With Dad's help, Kiry is funding a Roth IRA, an individual retirement account aimed at middle income taxpayers. Financial advisor Charles Sachs recommended it.
"A Roth IRA is a fantastic idea," said Sachs. "It's one of the greatest gifts out there. It's such a great deal. It's limited and the government says you can only put up to 55-hundred dollars a year into it."
Here's why Kiry's Roth IRA is so valuable: At age 25, if she or her dad puts in 55-hundred dollars a year, and the stock market goes up 7-percent a year, her initial investment will grow to $1.98 million by the time she's 65. Open the Roth IRA for a working child at age 16, with the same stock market growth, the account skyrockets to $3.2 million by retirement age. And all the money is tax free.
"It's a relief because I'm interested in things like painting and teaching yoga and these things are not financially secure," said Kiry.
Financial security during retirement came up during the State of the Union address when President Obama announced a new type of retirement account called myRA. These retirement accounts would be targeted to low wage earners who do not have access to employer-based retirement plans. A myRA could be opened with as little as $25 and contributions could be as low as $5.
"I call it a Roth IRA on training wheels," said Sachs. "Eventually taxpayers with a myRA will want to convert it to a Roth IRA."
The new retirement accounts proposed by the White House and the Roth IRA funded by Kiry and her dad are aimed at helping people like Kiry paint a prettier picture of retirement.
"It's nice to have an insurance policy to feel like I'm going to be okay," said Kiry.