ROTH IRA for minors
Thoughts on opening a ROTH for my teenage children? Do’s and don’ts?
Terry Says
Well, first of all they must have “earned income” (reportable at this stage on your tax return). The good news is that all the money will grow tax free for many years into the future.
You can open a Roth IRA for a minor (with parent as custodian) at any of the major brokerage firms, Fidelity, Vanguard etc. When they reach the age of majority in your state of residence, the money becomes their own. So you have a few years to convince them to keep it growing!
Note: Even if they spent the money they earned, you can make the contribution up to the amount of their earnings. And next year, if they earn money, tell them you’ll “match” if they will save half their earnings.
Invest the money in a S&P 500 stock index fund in the name of the Roth — separate account for each of them.
