Custodial Roth IRA: How It Works
A custodial Roth IRA is a Roth IRA opened in a minor’s name, managed by a parent or guardian as custodian. The account belongs entirely to the child — the custodian only controls it until the child reaches the age of majority (18 or 21 depending on the state), at which point the child takes full control. The same tax rules, contribution limits, and withdrawal rules apply as any Roth IRA.
Custodial Roth IRA rules for minors
| Rule | Detail |
|---|---|
| Who controls? | Parent/guardian as custodian until child reaches majority |
| Account ownership | Child owns the account — not the parent |
| Contribution limit | $7,000 or child’s earned income, whichever is less |
| Income limit for contribution | Based on child’s own income (usually none for kids) |
| Who can fund it? | Anyone — parent, grandparent, child — but total ≤ earned income |
| Required earned income? | Yes — child must have W-2 or self-employment income |
A parent contributes $2,000/year to their child’s Roth IRA from ages 15-18 ($8,000 total). Child never contributes again. At 7% average annual return, by age 65: $351,000 entirely tax-free. The parent’s $8,000 investment generated $343,000 in tax-free growth over 50 years.
Earned Income Requirements for Kids
- Your child must have earned income — wages, tips, or net self-employment income
- Mowing lawns, babysitting, lifeguarding, summer jobs, part-time retail, tutoring all qualify
- Parents who own a business can pay their minor children for legitimate work — wages must be reasonable and documented
- The contribution cannot exceed the child’s total earned income for the year
- Anyone (parent, grandparent, other) can fund the Roth IRA up to the child’s earned income limit
- Record-keeping is important: keep records of the child’s earned income in case of IRS questions
Where to Open a Custodial Roth IRA
Top custodial Roth IRA providers for minors
| Custodian | Custodial IRA Available? | Minimum Balance | Notes |
|---|---|---|---|
| Fidelity | Yes — Fidelity Roth IRA for Minors | $0 | Best overall; FZROX (zero expense ratio) available |
| Charles Schwab | Yes — Schwab Roth IRA | $0 | No minimums; excellent service |
| Vanguard | Yes | $0 for ETFs | Best fund selection; slightly more complex to open |
| E*TRADE | Yes | $0 | Good platform; Morgan Stanley parent |
| TD Ameritrade | Yes | $0 | Now part of Schwab |
Calculate Your Child’s Roth IRA at Retirement
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