Go to http://www.bankrate.com/brm/news/ira/20021211a .asp and read the article “Start Your Kids on the Roth Road.†Suppose you open a Roth IRA for your daughter and deposit $1,000 at the end of each year to match her earned income from age 14 to age 21 (8 years). Assuming she makes no withdrawals or additions to that account after the year that she turns 21, how much will she have in the account at the end of the year that she turns 60? Assume the money in the Roth IRA account earns 8% annually on average. (Hint: This is like an annuity for the first 8 years and then like a savings account.)
1. What is the value in starting investments at such Âan early age?
2. How might having such an investment set up impact the child’s future savings?
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