How to Open a Roth IRA for Minors
A Roth Individual Retirement Account (IRA) is a long-term savings account intended for retirement. You won't have to pay taxes on the interest earned on your Roth savings or when you withdraw your funds, provided you are age 59 1/2 or older and have held the account for five years. You can set up a Roth IRA for a minor child, but there are some requirements. You will be the custodian of the account until the minor reaches age 18. In addition, according to USA Today, the yearly contributions to the minor's account may not exceed his total earned income.
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Instructions
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Instructions
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Determine eligibility. According to USA Today, the minor must have earned taxable income and must be able to prove it with tax documents, such as a W-2 form. An allowance and gifts from relatives do not count.
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Check with your bank. Ask you bank about opening a Roth IRA account. Not every bank will open a Roth account for a child under the age of 18. The Kiplinger website lists Citibank, Bank of America, and PNC among banks willing to open a Roth IRA for a minor.
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Consider a brokerage firm. If your bank will not open a Roth account for a minor, look for a brokerage firm. Like banks, some brokerage firms also refuse to open a Roth IRA for minors. According to Kiplinger, Scottrade, Charles Schwab, E*Trade, and TD Ameritrade are firms willing to handle Roth IRAs for minors. Mutual fund companies including Vanguard or American Century are other possibilities.
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Prove income. When you open the Roth IRA for your child, bring the minor's proof of income, such as a W-2 form reporting the minor's income or a W-4 reporting tax withholding. Initial minimum investments and other requirements vary depending on the company. Kiplinger reports that Charles Schwab requires as little as $100 to open a Roth account.
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Tips & Warnings
When the minor turns 18, he will have control of the account, which means that he may choose to withdraw his savings well ahead of retirement age.
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Comments
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Roth IRA for minors when they get there first job I guess...but what if they are not old enough to work yet?
