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Can we stop our son from cashing in his Roth?

Q: Our son is 18 and works part-time for a retail store. He is expected to earn between $10,000 and $12,000 this year. I believe it to be true that he will not owe any income tax based on his pay grade, but I would like confirmation of that. We want to put him on a retirement plan. With no tax owing, he derives no benefit from contributing to the IRA. But we think a Roth IRA would be perfect. No tax deduction but tax free growth and tax free future withdrawal. He doesn’t have the money to contribute, so we told him we would contribute $6,000 to a new Roth for him. My question is if there are any rules that would allow us to prevent him from taking that money out of the Roth account.

A: First of all, great idea! Funding a pension plan at an early age allows for a longer period of tax-free accumulation within the plan.

Second, you are correct that your son will not have to pay taxes for 2022. The standard deduction of $12,950 will offset his earned income. No tax is due.

You can fund the Roth contribution – there is no record of the source of the funds. Of course, your son will need to set up the Roth account.

Unfortunately, there is no way to prevent your son from withdrawing the funds at his discretion. The acronym “IRA” stands for Individual Retirement Account so the account is entirely under your son’s control.

Plans established by the employer, such as 401(k), may restrict access to funds. Hardship distributions may be permitted before retirement, but even then the employee must prove hardship permitted by the plan.

Early Roth distributions may create negative tax effects. First, a distribution before the first day of the fifth year following the establishment of the Roth may result in taxes and penalties.

If you establish your son’s first Roth in the 2022 calendar, a distribution before January 1, 2027 could create a negative tax result.

Taxes and penalties may also apply if a distribution is made before the beneficiary reaches age 59.5. There are a few exceptions to this rule but for this discussion I won’t go into detail about each one.

At this point, we’ve concluded: 1) your son can take the Roth funds whenever he wants, and 2) the tax outcome will be bad if he does so before age 59½ (which is well after five years have passed).

Therefore, you might try to scare him into keeping the funds in the Roth with tax horror stories. Let’s just hope he’s not researching what those horrors are.

Try to convince him that an early cast will be like facing off against the rabid fox that terrorized the US Capitol or the rabbit from the final scenes of Monty Python and the Holy Grail.

The reality is that he won’t face anything fiercer than an energetic Golden Retriever pup. The IRS may nibble his ears a bit, but if not, he’ll do nothing worse than lick him to death.

How is it, you ask? First, all Roth distributions, whenever taken, are first deemed to arise from after-tax (non-deductible) contributions.

Since the contributions created no tax benefit, a withdrawal of these contributions does not create any taxable income. Without income, there can be no penalty.

After contributions, distributions are assumed to come from three types of “conversions”. None of these would apply to your proposal.

Finally, distributions come from earnings. Earnings on Roth contributions generate a tax benefit through their tax-deferred treatment.

If your son receives distributions that exceed all contributions made over the years, he will be taxed on that excess (which is income). He will also pay a penalty of 10% of the winnings withdrawn.

If you start a $6,000 annual contribution model, the account will begin to grow quickly. I know that is your intention.

But an annual contribution model also creates a healthy base of contribution dollars that can be withdrawn by your son at no tax cost.

If the Mad Fox and Ferocious Rabbit ideas didn’t work, you could try threatening to cut off all future contributions. This menace has more teeth (or saliva) than a golden pup.

Jim Hamill is the Tax Practice Manager at Reynolds, Hix & Co. in Albuquerque. He can be reached at

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