A custodial Roth IRA is a brokerage account you control until your child turns 18 or 21, depending on your state

You cannot open a regular Roth IRA in a child's name. Instead, you open what is called a custodial Roth IRA — an account held in your name as the custodian, with your child named as the beneficiary. You make all the decisions about where the money goes and how it is invested until your child reaches the age of majority (18 in most states, 21 in a few). At that point, the account transfers to your child's full control.

The account itself follows all the same Roth IRA rules: money grows tax-free, withdrawals in retirement are tax-free, and there are annual contribution limits. The main difference is that a child must have earned income — money from a job, self-employment, or modeling — to contribute. You cannot fund the account from your own income or from investment returns.

The brokerage firm or bank where you open the account will walk you through the custodial setup. You will provide your Social Security number, your child's Social Security number, and proof of your relationship. The process takes about 15 minutes online or 30 minutes in person at a branch.

Key Takeaways

  • Your child must have earned income in the year you contribute — money from a job, self-employment, or paid work — and you cannot contribute more than that year's earnings.
  • You open the account at a brokerage (Fidelity, Vanguard, Charles Schwab, or your bank) using your Social Security number and your child's Social Security number.
  • You control all investment decisions and withdrawals until your child reaches 18 or 21, depending on your state law.
  • The annual contribution limit for 2024 is $7,000 or your child's total earned income for the year, whichever is less.

Where to open a custodial Roth IRA

You can open a custodial Roth IRA at any brokerage firm or bank that offers them. The most common choices are Fidelity, Vanguard, Charles Schwab, E*TRADE, and Merrill Edge, but your own bank may offer them as well. Call ahead or check the website to confirm they have custodial accounts available — not all branches or online platforms do.

There is no meaningful difference between these firms for a custodial account. What matters is whether you already have an account there (which makes setup faster) and whether you are comfortable with their investment options. Most offer a range of mutual funds, index funds, and individual stocks. Some charge annual fees for custodial accounts; others do not. Ask about fees before you open.

You can also open a custodial Roth IRA at your child's school or workplace if they offer one through a financial literacy program, though this is less common. The mechanics are the same.

What documents and information you will need

Bring or have ready your Social Security number, your child's Social Security number, and a form of identification. If you are opening the account online, you will upload these. If you are opening in person at a branch, you will show them.

You will also need to know your child's earned income for the year — the exact dollar amount. This comes from a W-2 form (if your child is an employee) or from your own records (if your child is self-employed or does odd jobs). The contribution limit cannot exceed this amount. If your child earned $3,000 in the year, you can contribute up to $3,000, not more.

The brokerage will ask you to choose an investment option for the money. If you are unsure, most offer a target-date fund or a simple index fund. You can change this later.

How much you can contribute each year

The annual contribution limit for 2024 is $7,000 or your child's earned income for the year, whichever is smaller. This limit changes slightly each year — it was $6,500 in 2023 and may be $7,500 in 2025. Check the IRS website or your brokerage for the current year's limit.

If your child earned $2,000 in the year, you can contribute up to $2,000. If your child earned $10,000, you can contribute up to $7,000 (the annual cap). You do not have to contribute the full amount — you can contribute less if you choose.

You can contribute money you earned yourself, but the contribution cannot exceed what your child actually earned. This is a rule the IRS enforces. If you contribute more than your child's earned income, the excess will be subject to a penalty when you file taxes.

When to contribute and how the money grows

You can contribute to the account anytime during the year or up until the tax filing deadline the following year (usually April 15). If your child earned money in 2024, you can contribute for 2024 anytime through April 15, 2025. This gives you time to see how much your child actually earned before you decide how much to put in.

Once the money is in the account, it grows tax-free. If you invest it in a stock index fund and the value doubles over 10 years, you owe no tax on that growth. When your child withdraws the money in retirement (age 59½ or later), they owe no tax on the withdrawal either. This is the main advantage of a Roth IRA over a regular savings account.

You can withdraw your own contributions (the money you put in) anytime without penalty. You cannot withdraw the earnings (the growth) before your child is 59½ without owing taxes and a 10% penalty, with a few exceptions for education or first-time home purchase.

What happens when your child turns 18 or 21

At the age of majority in your state — 18 in most places, 21 in Alabama, Nebraska, and Wyoming — the account automatically transfers to your child's name and control. You no longer have authority over it. Your child can then invest it, withdraw it, or leave it alone.

This transfer is automatic. You do not need to do anything. The brokerage will handle it based on your child's date of birth. If you want to discuss the account with your child before the transfer, you can do that anytime, but you are not required to.

If your child is not ready to manage money at 18, you have no legal way to keep control of the account past that age. Some parents choose to discuss investment strategy with their child before the transfer happens, or to set up a meeting with a financial advisor together.

Frequently Asked Questions

Can my child contribute their own money to the account?

Yes. If your child has earned income, they can contribute their own money up to the annual limit. You do not have to contribute anything. Many parents and children split the contribution — the parent contributes some and the child contributes some from their job earnings.

What if my child does not have earned income?

Your child cannot have a Roth IRA without earned income. If your child is very young or does not work, you cannot open one. Once your child starts earning money — from a job, self-employment, or paid work — you can open an account and contribute based on that income.

Can I invest the money in anything I want?

You can invest in stocks, bonds, mutual funds, index funds, and most other securities offered by the brokerage. You cannot invest in collectibles, real estate, or life insurance. The brokerage will show you what is available when you open the account.

What if I need to withdraw the money before my child turns 59½?

You can withdraw your own contributions anytime without penalty. If you withdraw earnings before your child is 59½, you will owe income tax and a 10% penalty on the earnings, unless an exception applies (such as for education or disability). Contributions and earnings are separate — the brokerage can tell you which is which.

Do I report this account on my taxes?

You do not report the account itself on your tax return. When you contribute, you do not get a tax deduction (that is one difference from a traditional IRA). When your child withdraws money in retirement, they report it then. Your brokerage will send you a form each year if you need it for record-keeping.