Little People
Big Futures
Roth.Kids
Custodial Roth IRAs made easy
Too Good!
So powerful, the IRS had to set limits
A custodial Roth IRA is a retirement account set up for a minor that offers HUGE tax savings; They are so big that the IRS had to implement contribution limits.
See the impact
The Earlier the Better
The earlier you start investing in your child's future, the more potential growth. Below is a graph based on the average S&P return of 8.5% Give Them the Security They Deserve
Why Your Child Needs a Custodial Roth IRA
Custodial Roth IRAs offer a range of benefits that make them an amazing tool to secure your child's future.
Flexibility
The amount you deposit into a Roth IRA can be taken out without incurring any penalty.
Fund Life Events
Account holders can take out money to help pay for a home or education. This includes $10k for first home purchase tax and penalty free, and qualified educational expenses penalty free.
Tax Free Growth
The growth and withdrawals of the Roth IRA account is TAX FREE after the age of 59½
The Requirements
The only requirement to start a Roth IRA is earned income. This includes income from wages, salaries, & commissions. The income must be commensurate with the market (meaning the child cannot be paid $1000/hr for modeling. It is also important to maintain a paper trail of this earned income for the IRS. One example of earned income is for digital art commissions.
How To Open a Custodial Roth IRA
Before you begin you will need a couple of things:1) Earned Income
2) Your Child's Social Security Number to setup the account
3) Your Bank account information to fund the account
Best Custodial Roth IRAs
These are are our three recommendations to open a custodial Roth IRA online. Vanguard and Trowe Price also offer excellent options, but you are not able to complete the process online.
FAQ
What is a custodial Roth IRA?
A custodial Roth IRA is a retirement account set up for a minor with the help of a custodian (usually a parent). The account allows the child’s earnings to grow tax-free.
How much can be contributed to a custodial Roth IRA?
Contributions to a custodial Roth IRA cannot exceed the child's earned income for the year or the current annual contribution limit ($7000), whichever is lower.
What are the tax benefits?
Contributions are made with after-tax dollars, but growth and qualified withdrawals are tax-free.
What is Earned Income
Generally, compensation is what you earn from working; which includes wages, salaries, & commissions (for example from digital artwork)
Where can I learn more?
For more details refer to the IRS.gov