Minimum age to open up an IRA

Submitted by Keith Kim on Mon, 2020-01-20 21:54

Hello team,
How old one needs to be in order to open up an Ira?
I have a client who has teenager kids working for them. The client is considering opening up IRAs for them.
Also, do traditional IRAs and Roth IRAs differ in any way? I find articles on custodian Roths, not traditional IRAs.
Thank you as always!



Submitted by William Tuttle on Mon, 2020-01-20 22:34

  • However, a child must have compensation as defined in IRS Publication 590-A. The child must be paid a fair market value (FMV) wage for age appropriate business necessary tasks for the actual hours worked.
  • If the child is under the age of UTMA/UGMA termination* in the relevant state. A UTMA/UGMA IRA must be opened by a custodian for the child.
  • There is no practical difference in how a UTMA/UGMA traditional IRA or UTMA/UGMA Roth would work. However, given the fact that a minor child is less likely to make enough to pay any taxes. Even if they do it is highly likely to be at very low tax rates (10% or 12%). It would make no sense to contribute traditional IRA with little to no tax deduction, but have significantly higher taxes upon distribution. In fact, from appearances most custodians only offer UTMA/UGMA Roth IRAs for this very reason.

*This most often is not the same as the age of majority (adulthood) in most states.

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