Can I Open a Roth IRA for My Kid?

Written By Mary Beth Eastman
Last updated November 22, 2019

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February 5, 2019

Simple. Thrifty. Living.

If you want to help your child build wealth and a large retirement fund, then it’s important to have them start investing early. One way to get this done is by opening up a Roth IRA for your child. You can open a Roth IRA for your child as long as they qualify. But it’s important to understand the basics. Here’s what you should know:

Since there are no age restrictions for contributing to a Roth IRA, you can open a Roth IRA for your child at any age. However, your child must have earned income to be eligible for opening a Roth IRA.

Additionally, an adult must open the Roth IRA for the minor in a custodial account. Opening a Roth IRA account is simple and convenient when you do it online. Just choose a bank that offers a custodial Roth IRA, such as Charles Schwab or Fidelity. You’ll also need your tax documents to prove your child’s earned income and provide personal information for you and your child, such as your Social Security numbers. You are required to transfer the account to your child once he reaches 18 or the majority age in the state where he lives.

Before you open a Roth IRA, it’s important to consider the benefits and drawbacks it may bring. A major benefit of opening a Roth IRA for your child is that it gives them the opportunity to start saving for retirement early so that their funds have more time to grow.

A Roth IRA also provides the flexibility and convenience to make withdrawals at any time. Additionally, your child won’t owe any taxes on any withdrawals she makes during retirement. You also get to teach valuable financial management skills when you expose your child to investing early.

However, a major drawback to opening a Roth IRA for your child is that she has to have earned income that is filed and taxed. That means you cannot open the account with a gift or investments. Roth IRAs also aren’t tax deductible. Also, there are limitations to Roth IRA contributions. In 2019, Roth IRA contributions cannot exceed $6,000 or the total earnings made for the year. That means if your child earned $3,000 for his part-time dog-walking services, then the most you can contribute to that account for that year is $3,000.

Saving for your child’s retirement jump-starts her retirement fund’s potential to grow more over time, and a Roth IRA can help you achieve this goal. By understanding the basics, you can make a more informed decision on opening a Roth IRA for your child.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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