Nondeductable Roth IRA Contributions

[Guest JPB1]

Can an individual make a non-deductable Roth IRA contribution to someone other than a spouse? If so is it limited to that 1 individual or can it be made to multiple family members?

[ElGuapo]

To make a Roth contribution, the individual whose name is on the account must qualify, regardless of whether the dollars used came directly from their income or from a gift. Only a spouse can meet eligibility based on your earned income.

You could certainly make a gift to family members with the expectation that they will use the money to fund a Roth, provided they have enough earned income and are otherwise eligible to contribute.

Any chance you and I are related?

[John G]

A few additions:

Roth contributions are never deductible.

Yes, you can fund the Roth of someone else. When I teach my JA class "who really wants to be a millionaire" which is all about Roths, I suggest that students talk with a grandparent or aunt/uncle as see if they will match them to get started. It's a fun class where we get to talk about "The Millionaire Next Door", the Rule of 72, no load funds and index fund investing. I take the most skeptical kid and walk through 49 years of compound growth. They are ussually stunned with the result. These HS seniors are often very surprised by the response they get from a relative as well.

I have funded the first few years of four folks - it is a great thing to do to introduce a child to the adult world of money. My sister's two daughters. The daughter of a cousin. And a single mom in the neighborhood that has been struggling to raise two great kids. Roths are a great tool for teaching about investing.