How to Get Started Saving for Retirement

I hope I've both made the benefits of funding an IRA clear, and simplified it enough that you can show this to your teens.

But the question remains: How can we get a teenager to save for retirement?

My advice: Help them.

Let's assume you can afford to match their summer earnings. Do it. Let them have their hard-earned money, but open a Roth IRA in your child or grandchild's name and add the money yourself. Remember, the child may earn $1,000 but with taxes will not bring it all home. That doesn't keep you from putting a full $1,000 into a Roth for them.

Maybe you can't afford to add the full amount. Consider making a deal with your teen to match a portion of their earnings that they add to the Roth as well. If the teen contributes $250, maybe you'll contribute $500. Grandparents, obviously, can also get into this act.

Remember, the longer you or your children wait, the smaller your potential compounded earnings. Of course, with income comes taxes, and your children will need to begin filing their own tax returns.

And, as I mentioned earlier, contributions to a Roth IRA are not made pre-tax, as they would be on a traditional IRA. Also be aware that if you do help your child by contributing on their behalf, the total amount put into the IRA cannot exceed their total earnings in any given tax year. (This will be more of a concern for the youngest investors.)

In any case, helping to put your teenage child or grandchild on the road to a more comfortable retirement may truly be one of the best gifts you can make, and it will be one that keeps on giving, year after year. It may be years, but eventually your children will thank you for your foresight.

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