Kylie Jenner Created $14 Million Tax-Free Dollars For Her Daughter With This Loophole— and You Can Too!
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Professional investors like Ray Dalio and Warren Buffett are in agreement. Bonds are an important part of a healthy financial diet. And the legit only place I buy bonds, this is 100% true, you can totally check my account, is public. The modern brokerage for investors looking to build an awesome multi-asset portfolio.

And a quick moment of humility here. I have been trying to work with Public for years now and low-key stock them because I am such an avid Public user and every other app or site I've tried to buy bonds on has actually made me want to rip my hair out. Public is so easy to use and has thousands of bonds to choose from and not just US treasuries, but corporate bonds too, like for the magnificent seven stocks like Apple, Beta, and Nvidia.

And you can use public for more than your bond investments. On public, you can find all other major financial food groups, stocks, ETFs, high yield cash accounts, options, and even music royalties. If you're looking for a simple yet sophisticated investing experience, go to public.com/moneyrehab. One more time, because trust me, you will thank me. It is public.com/moneyrehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description.

I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Kylie Jenner, a woman who needs no introduction, has set her five-year-old daughter Stormi up to have $14 million tax-free by the time little Stormi is ready to retire. True, Kylie has buckets of money. Forbes called Kylie Jenner the youngest self-made billionaire.

Whether or not Kylie is self-made is a little debatable, but it doesn't matter whether you are or aren't a billionaire because anyone can use the same money moves as Kylie and make their kids millionaires. This is one of the best kept secrets in the financial world. You do not have to make a million dollars to make your kids millionaires.

Pick your jaw up off the floor and let me tell you how to make this happen for your fam. This is how Kylie did it. When Kylie's daughter Stormi was two, she appeared in a commercial for Kylie's brand Kylie Baby. Because Stormi was in the commercial, she could get paid for that appearance as an actor and Kylie could open what is called a custodial Roth IRA account for Stormi. A custodial Roth IRA account is exactly what it sounds like, a Roth IRA that a guardian can open for their kid.

The only real requirements is that the Roth IRA has to be funded by some income that the kid earned. So in Kylie's case, any income that Stormi earns as a model or actor in promotional materials or videos for Kylie's brand can totally go to her custodial Roth IRA.

If Stormy, via Kylie, continues to max out the Roth IRA contributions, then she will have over $14 million when she retires. And because it's a Roth IRA, not a traditional IRA, when Stormy goes to use that money in retirement, it will be totally tax-free.

Okay, I'll cut to something. I don't actually know if Kylie set this up for Stormi because the Kardashian-Jenners aren't going around giving interviews about their tax-advantaged retirement strategies. So silly, right? What else would they be talking about or posting about? But I can say with confidence that Kylie Jenner has the best accountant in

that thirst trap photo money can buy. So it's reasonable to assume that her accountant or perhaps team of accountants are probably recommending a custodial Roth IRA for her because that is bar none the smartest move for the next Kardashian generation.

For this reason, the custodial Roth is a popular move amongst the rich and the famous. Blue Ivy, for example, has been a backup dancer on tour with her mom, also known as Beyonce. So whatever Blue is earning on stage, she can put in a custodial Roth IRA.

But this isn't Blue's first time working for Boss B. She has been earning income from Beyonce and her dad Jay-Z since she was an infant, literally. When she was just two days old, Jay-Z used audio of her crying in his song Glory. But again, you don't have to be Beyonce or a Kardashian to use this money move.

The only prerequisite is that your kid is earning money that can fund the custodial route. So how do you make this happen? Well, if you own your own business, it is super easy to employ your kid as a model in marketing materials. Or if they're in their teens, maybe they can do something a little more involved, like running your social media account or helping organize your office.

If you don't have a business, just lean into what miniepreneurs have been doing forever now. Lemonade stands, yard sales, dog walking, any of these tried and true kid-friendly gigs will work. So that's step one. Your kid has to earn some money and it's about time they did anyway, right?

Step two, you have to set up a custodial Roth IRA. And for anyone who up until this point has been thinking what the actual F is a custodial Roth IRA, Lappin, I got you. Let's forget the custodial part for a second. A Roth IRA is a type of retirement account that qualified people can set up for themselves anytime. In order to be said qualified people, there are certain income limits. So in 2023, you could contribute to a Roth IRA if you file your taxes successfully

solo and make less than 153 grand a year, or if you file your taxes with a spouse and make less than $218,000 a year. If you make more than these income ceilings first, yay for you. And second, there is a perfectly legal loophole to start a Roth. I did a whole episode on this, and you can find that linked in the show notes. But let's assume you can just set up a Roth IRA in one step.

The special perk of a Roth is that you contribute post-tax dollars and your distributions are tax-free in retirement. Let me break that down. The way a Roth IRA is structured allows you to take money out of the account in retirement without having to pay income taxes on that money. This is unlike the traditional IRA where you can contribute pre-tax dollars, but when you take that money out in retirement, those withdrawals are taxed.

Both Roth and traditional IRAs have contribution limits. This year there's a new limit. The max amount you can contribute to your Roth IRA is seven grand if you're under 50 years old or eight grand if you're over 50. Now we're ready to get into the custodial part. Conceptually, I think you got this. It just means the account is a Roth IRA that's set up for a kid by a guardian like Stormy's Roth set up by Kylie. Probably.

Let's go a layer deeper and tackle the nuts and bolts of setting up this account. As a guardian, you can probably set up a custodial Roth IRA with whatever brokerage you've used to set up, hopefully, your own Roth IRA. But because custodial Roth IRAs are a little bit more complicated than a personal Roth IRA, it's worth double checking that your brokerage supports a custodial Roth.

Once you've set up that account, your kiddo can contribute whatever they've earned up to that seven K limit. And then and this is the mistake I see all the time. You actually have to invest the money that's in the account. It's not like you can just drop seven K in the account and it magically grows by eight percent. You have to actively invest that money. And that's where the compound interest and growth and all the yummy good stuff happens.

So which investments should you pick for the Roth? Because that money is likely going to be sitting in that account for a while, there is nothing wrong with sticking to a classic and investing that money in low cost S&P 500 index funds. This process, maxing out a contribution and investing, you're going to want to rinse and repeat that every year your kid has income. And then when your mini me is grown, they'll get control of the account

What age this handoff happens depends on what state you're in, but it will either be on your kid's 18th or 21st birthday. From there, your kid has to do their own Roth contributions themselves, and if they stick with maxing out those accounts, they too can be stormy rich.

For today's tip, you can take straight to the bank. While the money in a Roth IRA is pretty strictly reserved for retirement, your kids can use the money in their Roth to cover education expenses like college tuition. Typically, you can't take withdrawals from your IRA before retirement without getting hit with a 10% penalty, but education expenses are one of the few exceptions to this rule. And if you start funding a custodial IRA when your kid is two, they're going to have over $200K in their account by the time they're ready for freshman year of college.

While you're binging the pod, how about a little bonus tip? As a starting place for your investment allocation that you can, of course, tailor depending on your goals, pros recommend making your bond allocation your age. How about a second bonus tip? When you want to invest in bonds, use public. The modern brokerage for investors looking for a simple yet sophisticated investing experience.

Public is truly the only place I buy bonds, legit, because every other app or site I've tried to use is so complicated, but on Public, I can buy a bond on my iPhone in less than five minutes. This is a major upgrade because most investing platforms that offer bonds design their user experience before the iPhone was even invented. I'll let that one sink in. And you can use Public for more than your bond investments.

Public is the brokerage I use for all my investing needs, whether I'm looking for stocks, ETFs, a high-yield cash account, options, and other assets, even music royalties. To build the multi-asset portfolio of your dreams, go to public.com slash money rehab. One more time, because trust, you will thank me, public.com slash money rehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description.

Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.

Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.

Money Rehabbers, you have money hidden in your house. Yeah, just hiding there in plain sight. Okay, so I don't mean you have gold bars hidden somewhere in walls, treasure map style, but you do have a money making opportunity that you're just leaving on the table if you're not hosting on Airbnb. It's one of my all time favorite side hustles. By hosting your space, you are monetizing what you already own. It doesn't get easier than that. For me, hosting on Airbnb has always been a no brainer. When I first signed up, I remember thinking to myself, self, you pay a lot of money for your house.

that house returned the favor. And to get real with you for a sec, I felt so much guilt before treating myself on vacation because traveling can be so expensive. But since hosting on Airbnb, I feel zero stress for treating myself to a much needed vacation because having Airbnb guests stay at my house when I'm traveling helps offset the cost of my travel. So it's such a win-win. I mean, if I could do it,

you could do it. And your home might be worth more than you think. Find out how much at airbnb.com slash host. Money Rehabbers, you have money hidden in your house. Yeah, just hiding there in plain sight. Okay, so I don't mean you have gold bars hidden somewhere in walls, treasure map style, but you do have a money-making opportunity that you're just leaving on the table if you're not hosting on Airbnb.

It's one of my all time favorite side hustles. By hosting your space, you are monetizing what you already own. It doesn't get easier than that. For me, hosting on Airbnb has always been a no brainer. When I first signed up, I remember thinking to myself, self, you pay a lot of money for your house.

that house returned the favor. And to get real with you for a sec, I felt so much guilt before treating myself on vacation because traveling can be so expensive. But since hosting on Airbnb, I feel zero stress for treating myself to a much needed vacation because having Airbnb guests stay at my house when I'm traveling helps offset the cost of my travel. So it's such a win-win. I mean, if I could do it, you could do it. And your home might be worth more than you think. Find out how much at airbnb.com slash host.