By all accounts, Beyoncé is one of history’s most iconic and successful music artists. A 32-time Grammy-winning wife and mother of three, Beyoncé has built an empire unlike anyone else. During this year’s Super Bowl LVIII, she teased the release of her upcoming album, Act II: Cowboy Carter. All while her Renaissance World Tour brought in a cool $579 million.
An exciting twist came when Beyoncé’s eldest daughter, Blue Ivy, made her debut on her mother’s Renaissance Tour in Paris. She performed a choreographed dance routine to the song “Brown Skin Girl.” Blue Ivy’s income from her lifelong fame is turning into 6.4 million tax-free dollars. Here’s how she’s doing it, and how you can do it for your children too:
1.) Help your child get a job
In order for this to work, your child needs taxable, earned income. This could be starting a flower stand, mowing lawns, babysitting, or hiring them on as an employee for your own business.
Jay-Z did this by hiring Blue Ivy at 2 days old to cry on his song “Glory” in January 2012! Parents are thinking outside the box these days. Many parents have side hustles or work in the entertainment industry themselves. They may include their children in their work as a part of their brand.
By putting your child on the payroll, you can help them get a jump-start on their retirement savings. Of course, this is a personal preference, and there are some tips to help you stay within legal bounds. Patriot’s article “Keepin’ It in the Family: 10 Tips for Hiring Your Child” has a great visual resource you can reference.
2.) Open a Custodial Roth IRA for your child
These operate just like regular Roth IRAs, except they’re for kids and you have to open it for them (<18 years old). You can open a Custodial Roth IRA at custodians like Fidelity, Charles Schwab, and Vanguard.
You maintain control of your child’s Roth IRA, including decisions about contributions, investments, and distributions. Your child remains the beneficial account owner, and you must use the funds in the account for the benefit of your child. Upon the required age of 18 or 21 in most states, the assets must be transferred to a new Roth IRA account in their name.
3.) Fund and invest the account
You can contribute post-tax, just like a regular Roth IRA. The contribution limit is the same as a Roth IRA ($7,000 in 2024) or up to the total of your child’s earned income for the year, whichever is less.
You can then invest the money in a variety of investments, including stocks, mutual funds, and ETFs. Pay attention to withdrawal rules, as these are particularly nuanced. Investopedia’s article on ‘Roth IRA Withdrawal Rules’ has a table that details these nuances.
Let’s say Jay-Z and Beyoncé max out contributions to Blue’s Custodial Roth IRA every year for 18 years. In 2024, the (Custodial) Roth IRA contribution limit is $7,000 if under 50 years old.
We know the contribution rate has increased, and we anticipate it will continue to increase. But for the sake of this example, let’s assume this rate has – and will remain – a constant $7,000. For 18 years, her parents would have contributed $126,000.
Let’s assume her parents have invested her Custodial Roth IRA in an S&P 500 Index fund. Adjusted for inflation, the S&P 500 has returned >8% per year since 1980. By the time Blue Ivy is 59 ½ years old, when she is eligible to withdraw earnings from her Roth IRA penalty- and tax-free, she will have over $6,640,000 in her Roth IRA!
Blue Ivy’s net worth is already an estimated $720 million. Having her own Custodial Roth IRA is the cherry on top of this empire she’s a part of. Her story is certainly exceptional, but there are invaluable personal finance lessons we can learn from some of the most famous and successful people in the pop culture zeitgeist. Opening a Custodial Roth IRA for your children lets them start benefiting from tax-free growth early on. While your children may prefer spending money on movies, new gaming devices, or the latest tech, they may thank you years from now for the gift that keeps on giving.
Editor’s note: Beyoncé featured her 6-year-old daughter, Rumi Carter, on the song “Protector” in her latest album, Cowboy Carter, released on March 29. If Beyoncé and Jay-Z started funding a Custodial Roth IRA for Rumi today through her 18th birthday, she would have about $3,640,000 in her Roth IRA by the time she turned 59 ½ years old. By the looks of it, Rumi’s twin brother, Sir, needs to make a cameo soon to jump-start his retirement savings!
