Minor Roth IRA, What You Need to Set it Up

Starting a Minor Roth IRA for your kids can greatly help them out in their future. If you would like to create an IRA for Children you are probably wondering, can I start a Roth IRA for a child and if so how?

Starting a Roth IRA for Minors is probably going to help them a lot more then starting a Traditional IRA because your child is not likely making enough to benefit from the tax breaks that come with traditional IRAs anyways. But they will still benefit from the tax breaks that come from a Roth IRA which can help then get a tax free income in their future.

So, now we know what type of account we want to open, that’s great, but how do you set it up? While there is no age requirements to open up a Roth IRA there are a few Roth IRA Requirements that your child must meet if they want to create their own account.

• They Must Have Earned Income

• They Must make under a certain amount each year

While it is unlikely that your child is making 100,000s a year to be disqualified from participating based on income (if they are there wouldn’t even be a need to set up a retirement plan) they do need to have earned income.

Earned income is basically any income that they needed to work for in order to get. In other words things like interest off of investments or weekly allowances do not count.

But you can start a Roth IRA for Minors if they have a part time job, or even if they are cutting grass and babysitting for the neighbors (in exchange for money of course).

Another thing that can be considered earned income is money earned from doing everyday chores. For example if you pay your children to wash the dishes and take out the trash it can qualify as earned income.

But to be able to set up a Roth IRA for Children using chore money to qualify you do have to keep a record of the chores you pay them and have to fill out some government forms. I’m not getting into that here, but if you want to figure out exactly what you need to do in order for chores to qualify as earned income visit the link below.

http://www.irs.gov/pub/irs-pdf/p926.pdf

As long as they have earned income they can open an account at any brokerage or bank that allows you to start an IRA for children.

Depositing Money Into A Minor Roth IRA

After you set up a Roth IRA for Children both you and your kid can invest into it. However the amount invested into it cannot exceed the child’s income. If the kid only makes $500 in that year and you invested $1,500 into their Roth IRA you might run into some problems with the IRS.

Other than that depositing money into a Minor Roth IRA plan can be a great way to help your kid get a head start in their retirement planning.

Why Start a Minor Roth IRA

So, why would you want to start a Roth IRA for children? Well think about it this way, the longer money can be invested the more time it has to grow. If a kid starts saving in their teenage years they may find out that they have accumulated $1 million dollars or more by the time they reach retirement.

It also sets them up on the right path and encourages them to save up money for their future. Setting up a Roth IRA for Minors can be a great way to put kid up on the right financial path and can help them achieve their retirement goals a lot earlier.

Return From Minor Roth IRA to IRA Account Rules