Great question!!
My first question would be, does she work?
If she is filing Single, then she would not be able to put money in a retirement account unless she has income.
If you gift her some money, and she does not have a 401 K available for her at her place of employment then she can contribute up to $6500 (if under 50) and $7500 (if over 50) to a traditional IRA or ROTH IRA. The IRA would be claimed on her tax return as a contribution and would lower her taxable income by that amount. When the money is taken out, then it would be taxed (including any interest/gains on investment) The ROTH IRA would be entered on her return but would not lower her income. When the money is taken out, then it would be tax free (including any interest/gains on investment).
If she is over 59 1/2 she can take the money from the IRA and ROTH IRA out and avoid any penalties. If she keeps the ROTH IRA in her account for 5 years, she can take the principal out and not be taxed even if under 59 1/2 years old.
That I guess is the issue, will she take the money out? Then she might be taxed and penalized depending on her age.
Please give me a thumbs up if this was helpful.
Katie S.
Katherine S 63
