Part 3/5:
Lapera probes deeper into the nature of earned income, asking if informal jobs like babysitting qualify for IRA contributions. Caplinger confirms that all legitimate earnings from work can indeed form the basis for IRA contributions. He noted that parents setting up IRAs for their children based on these earnings—whether from chores or jobs—are operating entirely within IRS guidelines.
The Case for Early Savings
The conversation shifts to the importance of starting retirement savings early, a notion Lapera emphasizes throughout their discussion. Starting to save for retirement at a young age can yield substantial benefits down the line. Caplinger stresses that even a modest amount saved early can grow significantly over time due to the power of compounding.