My son is working as an umpire for youth baseball games and is earning money for the first time. Can he contribute to a Roth IRA even though he’s only 15 years old? Which companies offer good Roth IRAs for kids?
There’s no minimum age requirement to open a Roth IRA, so your son can open one as long as he has earned income from a job (investment income doesn’t count). He can contribute up to the amount he earned from working this year, with a maximum of $5,500 for 2016. You’re allowed to give him the money to make the contribution.
Not all IRA administrators offer Roth IRAs for minors, but many do. Look for a firm with low investment minimums and low or no administrative fees. TD Ameritrade and Fidelity have no investing minimums or annual fees for their custodial IRAs. Charles Schwab requires $100 to open a custodial Roth IRA but charges no annual or maintenance fees. These brokerage firms offer the same mutual funds, stocks and other investments in their custodial Roth IRAs as they do in their regular IRAs.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Most firms require two names to be on a custodial Roth IRA account: the minor and an adult, who doesn’t have to be a parent or grandparent. The adult generally receives the account statements and controls the account as long as the child is a minor (until age 18 or 21, depending on the state).
Opening a Roth IRA is a great way to jump-start your son’s savings. If he needs money before retirement, perhaps for a down payment on a house or college costs or to supplement an emergency fund, he can withdraw the contributions tax-free and penalty-free at any time. Longer term, he can accumulate a significant balance and, after age 59½, withdraw the earnings without penalties or taxes.
A 15-year-old who contributes $3,000 today will have more than $34,000 by age 65 just from that initial contribution, assuming his investments earn 5% per year. If he continues to contribute $3,000 every year and his investments earn 5% per year, his account will be worth more than $650,000 by the time he turns 65.
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
My Four Pieces of Advice for Women Anxious About Handling MoneyTalking about money can help you take control of your finances.
-
Best 401(k) Investments: Where to InvestKnowing where to find the best 401(k) investments to put your money can be difficult. Here, we rank 10 of the largest retirement funds.
-
How to Find the Best 401(k) InvestmentsMany folks are likely wondering how to find the best 401(k) investments after signing up for their company's retirement plan. Here's where to get started.
-
Now You Can Own Bitcoin in 401(k)s. Should You?cryptocurrency Fidelity will begin allowing investors to put Bitcoin in their 401(k)s. But is this retirement vehicle the right place to hold crypto?
-
Seven Reasons to Avoid a Self-Directed IRAself directed IRA Self-directed IRAs let investors do things they can't in an ordinary IRA, like invest directly in alternative assets. But this opportunity also comes with these risks.
-
Solving the Income Challengeretirement planning Generating a regular income stream out of your savings and investments can be anxiety-inducing, but digital solutions, such as Schwab Intelligent Income, can help you get it right.
-
5 Best Financial Gifts for Grandkidsgift ideas If you've been giving your grandchildren cash for the holidays, now is a good time to rethink that. There are other financial gifts that will help teach them the value of money and set them up for life.
-
The Best American Funds for 401(k) Retirement Saversmutual funds American Funds has 13 actively managed mutual funds among the 100 most popular 401(k) offerings. We look at the best American Funds in that group … as well as some of the laggards.
