Roth IRA for Teenagers

Published in Rules  |  3 Comments

One of the most popular questions I get is whether a teenager can get a Roth IRA and the answer is yes, as long as they have income.

The rule for the Roth IRA is that you can contribute based on how much you’ve earned in a year. If you’ve earned $2,000, you can contribute up to $2000 (after taxes) to your Roth IRA. If you earned more than $5,000 then the limit for the Roth is $5000.

When it comes to teenagers, you will want to open a custodial account at a brokerage. Since they’re under the age of 18, they can’t open their own account but you can open one on their behalf, you are their custodian, which is effectively the same thing. For all intents and purposes, the account is theirs but you are watching over them to make sure they don’t make any mistakes, right? :)

Remember, they can only contribute as much as they declare on their taxes. So, if they’ve been mowing lawns and don’t intend to claim that income on a Form 1040, they can’t put that towards their Roth IRA. Technically, your children have to claim that income but if they don’t, they can’t use it towards their Roth IRA.

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    August 20th, 2008 at 6:03 am (#)

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    [...] answers the FAQ can children contribute to Roth IRAs in Roth IRA for Teenagers posted at Roth IRA Explained. I don’t recall earning that much at age 12, but maybe my kids [...]

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