Friday, April 25, 2008
Instapundit links to Put Your Kids to Work Day, which suggests *putting* your kids to work.
There's a tax angle to this - if your kid can get paid for some work (yes - even by you) he can put his earnings into an IRA, or possibly a ROTH IRA. The tax deferral/savings on an IRA started when one is a teenager are extraordinary given the long period of compounding. If taxation costs 2% per year, and the IRA lasts 50 years the tax deferral amounts to $2.70 for every dollar earned. [($saved * (1+pretax return^years))-($saved*(1+posttax return^years))]
Of course tax rates may be 99% again in 50 years, in which case...well, go for the Roth IRA if you can!
There's a tax angle to this - if your kid can get paid for some work (yes - even by you) he can put his earnings into an IRA, or possibly a ROTH IRA. The tax deferral/savings on an IRA started when one is a teenager are extraordinary given the long period of compounding. If taxation costs 2% per year, and the IRA lasts 50 years the tax deferral amounts to $2.70 for every dollar earned. [($saved * (1+pretax return^years))-($saved*(1+posttax return^years))]
Of course tax rates may be 99% again in 50 years, in which case...well, go for the Roth IRA if you can!
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