Custodial IRA for minor

Submitted by Vickie Intriago on Mon, 2021-05-03 16:59

I am only entertaining this question because one of my High net worth clients wants to open a ROTH IRA for his teenagers.
I found a custodian that will open a custodial ROTH. Question is does the minor still need to work and earn up to $6,000 in order for adult to deposit the $6,000 ?

If minor only earned $3,000 is that limit of the ROTH IRA?

Please advise.

thanks



Submitted by Alan - IRA critic on Mon, 2021-05-03 18:04

Yes, the minor still must have earned income from either a W-2 or from self employment income. Allowance payments from doing household chores is technically not taxable comp so it is not advised to use such income for IRA contributions. The minor’s max contribution is the lower of 6000 or their earned income, so 3000 in this case. As long as the minor has such earned income, it is OK for the minor to spend that income and use a gift from parents to fund the Roth IRA.

Add new comment

Log in or register to post comments