A parent or guardian opens a custodial Roth IRA in the minor's name

You cannot open a Roth IRA directly in a child's name. Instead, you open what is called a custodial Roth IRA — the account belongs to the minor, but you control it until they reach the age of majority (usually 18 or 21, depending on your state). The brokerage or bank holds the account in the child's Social Security number, and you act as the custodian.

The minor must have earned income to contribute to the account. This is the single hard requirement. Earned income means money the child received from working — a job, self-employment, modeling, acting, or similar work. Unearned income like allowance, gifts, or investment returns does not count. The contribution limit for 2024 is the lesser of $7,000 or 100 percent of the child's earned income that year.

You will need the child's Social Security number, date of birth, and address to open the account. Most brokerages also ask for your own identification and Social Security number as the custodian. The process takes 10 to 20 minutes online at most major brokerages.

Key Takeaways

  • The minor must have earned income from work in order to contribute anything to a Roth IRA that year.
  • You open a custodial Roth IRA through a brokerage or bank, and you retain control of the account until the child reaches adulthood.
  • The contribution limit is the smaller of $7,000 or 100 percent of what the child earned that year.
  • You can fund the account with money you give the child, as long as the contribution does not exceed their actual earnings.

Where to open a custodial Roth IRA

Most major brokerages offer custodial Roth IRAs. Fidelity, Vanguard, Charles Schwab, E*TRADE, and Merrill Edge all have them. Credit unions and some banks also offer them, though the selection of investments may be more limited. There is no single "best" choice — the differences are usually in fees, investment options, and user interface.

Call the brokerage or visit their website and search for "custodial Roth IRA" or "minor Roth IRA." You will be directed to an application form. Some brokerages let you open the account entirely online; others require you to print and mail a form or speak to someone by phone. The timeline is usually same-day to three business days.

There is no annual fee to hold a custodial Roth IRA at most brokerages. Some charge a small fee if the account balance falls below a minimum (often $500 to $2,500), so check the terms before you open. Investment fees — the cost of buying mutual funds or exchange-traded funds inside the account — vary by what you choose to invest in.

How to fund the account with the child's earnings

The money you contribute must come from the child's earned income. If your child earned $3,000 from a summer job, you can contribute up to $3,000 to their Roth IRA that year. You can use your own money to make the contribution, but the contribution amount cannot exceed what the child actually earned.

The IRS does not require you to show proof of earnings when you open the account, but you must keep records. If your child worked for an employer, keep the pay stubs or a letter from the employer stating the total wages. If your child was self-employed (for example, babysitting or lawn care), keep a record of income — a simple log of dates, services, and amounts paid is sufficient.

You can contribute to the account anytime during the year the child earned the income, or until the tax filing deadline the following year (usually April 15). For example, if your child earned $2,000 in 2024, you can contribute up to $2,000 anytime in 2024 or by April 15, 2025.

What happens when the minor turns 18 or 21

The age at which the child takes control of the account depends on your state law and the brokerage's terms. In most states, this happens at age 18. In a few states (California, Nevada, and others), it happens at 21. Check your state's law and the brokerage's custodial agreement before you open the account.

When the child reaches that age, the custodial account automatically converts to an adult Roth IRA in their name. You no longer have control, and the child can withdraw money, change investments, or make new contributions on their own. The money already in the account stays in the account and continues to grow tax-free.

Some brokerages send a notice before the conversion happens. Others do it silently. Log into the account periodically as the child approaches the age of majority so you are not surprised by the change.

Tax reporting and documentation

The custodial Roth IRA is reported on your tax return using the child's Social Security number. You do not report it on your own tax return. The brokerage will send you a Form 5498 each year showing the contributions made. You do not need to file this form with the IRS, but keep it for your records.

Contributions to a Roth IRA are made with after-tax money, so there is no tax deduction. The child does not owe income tax on the money that grows inside the account, and they will not owe tax when they withdraw it in retirement (as long as the account has been open for at least five years and they are at least 59½).

If the child has other income and files their own tax return, the Roth IRA contribution does not affect their return. It is simply a record of savings.

Common reasons a custodial Roth IRA does not work

If the child has no earned income, you cannot open a Roth IRA for them. A child who receives only allowance or gifts cannot contribute. A child whose only income is from investments (dividends, interest, or capital gains) cannot contribute. The earned income requirement is strict and is the most common reason families cannot use this account type.

If you want to save for a child's education, a 529 plan or a Coverdell Education Savings Account may be better options. If you want to save for general purposes and the child has no earned income, a simple savings account or a custodial brokerage account (not a Roth IRA) works instead.

If the child is very young and unlikely to have earned income for several years, you may want to wait until they are old enough to work before opening the account. There is no age minimum to open a custodial Roth IRA, but there is no point opening one if there is no income to contribute.

Frequently Asked Questions

Can I contribute more than my child earned if I want to save more for them?

No. The contribution limit is the smaller of $7,000 or 100 percent of earned income. If your child earned $2,000, you can contribute at most $2,000, even if you want to put in more. The IRS enforces this rule strictly.

What if my child earned money but I did not keep records?

You should have documentation. If your child worked for an employer, ask for a copy of their W-2 or a wage statement. If they were self-employed, create a record now showing dates, services, and amounts. The IRS rarely audits Roth IRAs for minors, but if they do, you will need proof of the earnings.

Can I open a custodial Roth IRA for a child who is already 17?

Yes. As long as the child has earned income that year, you can open the account and contribute. The account will convert to an adult Roth IRA when they reach the age of majority in your state, usually within a year or two.

What if my child wants to withdraw money before they turn 59½?

Contributions (the money you put in) can be withdrawn anytime without penalty or tax. Earnings (the money the account made through growth) withdrawn before age 59½ are subject to income tax and a 10 percent penalty, with some exceptions for education or first-time home purchase. This is one reason to use a Roth IRA for long-term savings, not short-term goals.