Putting your baby to work as a model could net them $5.7 million by age 60. Here’s the legit way to do it.
Short version
– Babies and kids can have real, legal earned income from modeling or acting. Earned income unlocks a custodial Roth IRA.
– Contribute up to the child’s earned income (capped at the annual IRA limit: $7,000 for 2024). Invest in low-cost stock index funds and let compounding work.
– If you can legitimately max a Roth IRA for roughly 13 years in childhood and earn an 8% average annual return, it can grow to about $5.7 million by age 60—tax-free if withdrawn as a qualified distribution.
– Do it right: real work, market-rate pay, permits where required, proper tax paperwork, and a good paper trail.
The math that makes the headline true
– Assumption: $7,000 contributed each year from birth through age 12 (13 contributions), invested at an 8% average annual return, then no further contributions.
– Result: About $5.6–$5.7 million by age 60, tax-free if taken as qualified Roth distributions.
– Even if you don’t max out, the numbers still get big. Example: $2,000 per year for 13 years at 8% grows to roughly $1.6 million by age 60.
Two legitimate paths to “earned income” for a baby
1) Third-party work (agencies/clients)
– Your child books paid photo/video shoots via a casting call or agency.
– Pay is typically W-2 (employee) for union/major gigs or 1099 (contractor) for some print/social shoots.
– In CA, NY, and some other states, you’ll need a child-performer permit and a blocked trust (Coogan/child performer trust). Typically 15% of gross pay must be deposited into that account.
2) Your own bona fide business hires the child as a model
– If you run a real business (sole proprietorship or a partnership where both partners are the child’s parents), you can hire your child as a model for ads, your website, mailers, etc.
– Pay must be reasonable for the market and the work actually performed. Keep proof (shoot sheets, finished ads, usage dates, rates from comparable local shoots).
– Important payroll advantage: Wages you pay to your under-18 child from a sole proprietorship or a parent-only partnership are exempt from Social Security and Medicare taxes (FICA), and under-21 wages are exempt from FUTA. This exemption does not apply if you pay through an S corp, C corp, or a partnership that includes a non-parent partner.
How to make it fully compliant
– Do real work at a market rate
– “Reasonable compensation” means what you’d pay an unrelated baby model. For local small-business ads, a few hundred dollars per half-day session is common; national campaigns pay more.
– Pay by check/transfer, not cash. Keep timesheets, call sheets, talent releases, and copies of the creative where your child appears.
– Get the right permits and accounts
– State child-performer permits: Required for many entertainment and modeling gigs in CA, NY, and elsewhere.
– Coogan/child performer trust: Required in CA and NY (and some other jurisdictions). Typically 15% of gross pay is deposited; the remainder can fund a Roth IRA (see below).
– Schooling and hour limits: States restrict child work hours, especially for infants. Productions will coordinate this; still, know your state’s rules.
– Handle taxes correctly
– W-2 employee gigs: Normal income tax withholding; FICA applies. If total income is below the standard deduction ($14,600 in 2024), the child often owes no federal income tax and may get a refund.
– 1099 contractor gigs: The child may owe self-employment tax on net earnings over $400. Track expenses (mileage to set, agency fees, etc.) to reduce net income.
– Family business payroll: If you’re a sole prop or qualifying parent partnership, pay your child through payroll and issue a W-2. Under-18 FICA exemption and under-21 FUTA exemption can apply.
– File a return when needed: Besides being compliant, it documents earned income supporting the Roth IRA contribution.
Open and fund a custodial Roth IRA
– Who can contribute: Anyone can gift the cash, but the child must have earned income at least equal to the annual Roth contribution. The contribution limit is the lesser of earned income or the annual cap ($7,000 for 2024; indexed to inflation).
– Where to open: Most major brokerages offer custodial Roth IRAs (Fidelity, Schwab, Vanguard, etc.). The adult is custodian; the child is the owner.
– Invest simply: A low-cost total-market or S&P 500 index fund is typically enough. Automate contributions. Keep fees near zero.
– Withdrawals: Contributions can be withdrawn anytime. Earnings are tax- and penalty-free if distributions are qualified (generally after age 59½ and 5-year rule). This long horizon is why Roths shine for kids.
Paperwork to keep (for both IRS and child-performer rules)
– Photos of the work and copies/URLs of where it appeared.
– Signed talent/model releases.
– Invoices, agency contracts, call sheets, session logs, usage agreements.
– Payroll records or 1099/W-2s, pay stubs, deposit slips.
– Permit copies and Coogan/child trust statements.
– A brief memo on how you set the pay rate (quotes or screenshots of comparable rates in your market).
What about Coogan accounts vs. Roth IRAs?
– In states like CA and NY, 15% of gross earnings must go to the child’s blocked trust. This is separate from a Roth IRA.
– You can still fully fund a Roth IRA up to the child’s earned income and the annual cap. The dollars don’t have to be the same dollars the child earned—parents can gift the cash, as long as the child had sufficient earned income that year.
How much does a baby actually need to earn?
– To max a Roth in 2024, the child needs at least $7,000 of earned income that year.
– Realistic ranges: Local print/social shoots often pay $200–$500 per session; larger campaigns pay more. If you run your own business, multiple short shoots across the year can reasonably reach several thousand, if well documented.
Common pitfalls to avoid
– Paying through an S or C corporation and assuming the FICA exemption applies. It doesn’t.
– Overpaying the child to inflate deductions or IRA room; compensation must be reasonable and tied to actual work.
– Weak records. If you can’t prove the work was done and used, the IRS can disallow the deduction and the Roth contribution.
– Ignoring state permit and trust requirements. Productions—and sometimes banks—will ask for these.
– Forgetting self-employment tax on 1099 income.
A realistic game plan
– Month 1: Confirm you have a bona fide business need for child modeling or connect with a reputable agency. Learn your state’s child-performer rules and open any required trust account.
– Month 2: Do a real shoot. Document everything. Pay your child at a market rate via payroll (family business) or accept W-2/1099 from the client. Save all records.
– Month 3: Open a custodial Roth IRA. Contribute up to the child’s earned income (capped at the annual IRA limit). Invest in a low-cost index fund. Set up auto-investing.
– Each year: Repeat as opportunities arise. File taxes for the child if needed to document income and recover any over-withholding. Keep records tidy.
Ethics and well-being first
– Work hours, safety, and school take precedence. Choose age-appropriate work and respect your child’s comfort. You’re the fiduciary for their time and money.
Final word and a reality check
– You don’t have to hit the maximum every year. Even modest, sporadic contributions made very early can snowball into six or seven figures by age 60.
– The $5.7 million outcome assumes long-term stock-market returns that will vary, and it’s in future dollars, not today’s purchasing power. But the core idea—start early, invest simply, keep it compliant—holds up in almost any market.
This is general education, not legal or tax advice. Child-labor, tax, and trust rules vary by state. Work with a CPA/attorney experienced in child performers and family payroll to set this up correctly.
