Can my 17 year old open a Roth IRA? (2024)

Can my 17 year old open a Roth IRA?

Anyone with earned income can contribute to a Roth IRA regardless of their age. An adult has to open a custodial account for a minor. The adult controls the account until the child reaches the age of majority, at which point, the young adult takes over.

How much can a 17 year old contribute to a Roth IRA?

Custodial Roth IRA rules

If a child is 17 or younger and earns income that they pay tax on, they are eligible for an IRA for kids. Just like Roth IRAs for adults, the contribution limit for a Roth IRA for kids in 2023 is $6,500 or the total annual earned income, whichever is less.

How do I prove my child's income for a Roth IRA?

Ideally your child should have a W2 or a Form 1099 to show evidence of the earned income. However, there are some instances where this may not be possible so it's important to keep records of the type of work, when the work was done, who the work was done for and how much your child was paid.

Can I open a Roth IRA for my 2 year old?

Even babies can contribute to a Roth IRA: The hurdle to opening this account is about earned income, not age. The child must have earned income. If a kid has earned income, they can contribute to a Roth IRA.

Can a 17 year old open a traditional IRA?

Children of any age can contribute to an IRA as long as they have earned income, whether it's from lifeguarding or a fledgling business of their own. This means that a child who earns $3,000 this year could contribute up to $3,000 to an IRA. A child who earns $10,000 in 2024 could contribute $7,000, the maximum.

What is the disadvantage of a Roth IRA for kids?

Cons: Any contributions you make to a custodial Roth IRA become the child's money - you can't take it back if they act irresponsibly once they control the account. The child won't have access to profits without penalties (with some exceptions) until they reach 59 ½ under current rules.

What happens to a minor Roth IRA when they turn 18?

However, the minor remains the beneficial account owner and the funds in the account must be used for the benefit of the minor. When the minor reaches a certain required age, typically either 18 or 21 in most states, the assets must be transferred to a new account in their name.

Does my child need to file a tax return to open a Roth IRA?

We often get the question: "Does my child need to file a tax return to make a Roth IRA contribution?" The answer is "no". If their taxable income is below the threshold that would otherwise require them to file a tax return, they are not required to file a tax return just because a Roth IRA was funded in their name.

Can I open a Roth IRA if my parents claim me as a dependent?

As long as you have earned income that's less than the Roth limits, you can contribute to a Roth account, said Mark Luscombe, principal analyst for tax research firm CCH Inc. Your status as a dependent and your parents' household income aren't factors.

Can a parent open a Roth IRA for their child?

A Roth IRA can be opened for a minor child who has earned income for the year. Roth IRAs can offer tax benefits, including tax-free qualified distributions in retirement. Parents maintain control of the Roth IRA until the child reaches adulthood, at which time the account is transferred to them.

How much will a Roth IRA grow in 20 years?

If you contribute 5,000 dollars per year to a Roth IRA and earn an average annual return of 10 percent, your account balance will be worth a figure in the region of 250,000 dollars after 20 years.

What is the youngest age for custodial Roth IRA?

Since there's no age restriction on Roth IRA accounts, families can use them to help kids get a head start on both retirement savings and wealth-building goals. Not only is it an opportunity for parents and children to talk about saving and investing, but the money potentially benefits from decades of tax-free growth.

How can I build my child's wealth?

Speaking with your children about money, investing for the future, moderating debt, having an estate plan, utilizing life insurance, and using current laws in your favor are steps you can take to create generational wealth.

How much can I contribute to my child's Roth IRA?

Each year, you can contribute up to 100% of the child's income, to a maximum of $6,500 for 2023 and $7,000 for 2024. Example 1: If your child earns $1,000 mowing lawns, you could contribute $1,000. Example 2: If your child earns $10,000 mowing lawns, you could contribute to the $6,500 or $7,000 limit.

Does a child Roth IRA affect financial aid?

We'd like to help them start building their retirement savings by matching what they contribute. Will owning the Roth in their names affect their eligibility for financial aid? Money in your daughters' Roth IRAs won't affect their aid eligibility as long as they don't make any withdrawals.

Can parents contribute to an adult child's Roth IRA?

The Bottom Line. IRAs are, by their very existence, funded by the individual holding them. If you have a custodial, spousal, or designated Roth IRA, then as long as the contributions don't exceed preset limits, there is no issue with someone else giving you the money to invest.

Who should not do a Roth IRA?

How do I set up a Roth IRA for a minor?

Should I open a custodial Roth IRA for my child?

Custodial Roth IRAs will grow your children's money for decades: By contributing to their retirement savings early on, your child will benefit from decades of tax-free, compounding growth. Eventually, they could end up with a comfortable nest egg to support them after they stop working.

How much can an 18 year old put in a Roth?

Key takeaways

The Roth IRA contribution limit for 2023 is $6,500 for those under 50, and $7,500 for those 50 and older. And for 2024, the Roth IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older.

At what age can a child earn income?

The IRS defines eligible compensation as taxable income, including wages, salaries, and tips. While children generally must be at least 16 years old to obtain formal employment, there are situations in which a younger child may earn income, such as modeling, acting, or working for a family company.

Can you open Roth IRA without income?

There is no age requirement to open a Roth IRA. To contribute, you must have earned income in the year you wish to contribute.

How much should I put in my Roth IRA per month?

How Much Can I Put in My Roth IRA Monthly? In 2023, the maximum annual contribution amount for a Roth IRA is $6,500, or $541.67 monthly for those under age 50. This amount increases to $7,500 annually, or roughly $625 monthly, for individuals age 50 or older.

How much money can my child make and still be claimed as a dependent?

If the dependent child is being claimed under the qualifying relative rules, the child's gross income must be less than $4,700 for the year in 2023. This threshold increases to $5,050 for 2024.

When should you stop claiming your child as a dependent?

To meet the qualifying child test, your child must be younger than you or your spouse if filing jointly and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year.