Can I open a Roth IRA as a gift to my children even if they have no ea

[Guest sidhum]

In the Los Angeles Times "Parade" section on October 22, 2000 is an article entitled "Is the Roth Ira for you?" -- In the last paragraph, it states, "Consider opening a Roth IRA as a gift to your children."

Can this be done even without earned income? I like to open one for them by giving them a gift.

Also, what about from the money earned as dividends from their stock portfolios?

[John G]

A child can have a Roth IRA if the child has earned income, just like everyone else. So, if the child has a part time job, babysits, or mows lawns they may potentially qualify. The Roth can be opened by a parent or relative with the funds as a gift. Some adult will have to be a guardian for a minor child. Note, some custodians don't like opening IRAs for kids but if you make enough phone calls you can find a brokerage or mutual fund family that will say yes.

There is also an educational IRA that is a totally different savings vehicle. The max amount here is $500 in any one year per child (not per donor) and it is designed to be an investment vehicle for college. Unfortunately, our Congress did not think through the math as 18 years times $500 may even fall short of one year of college expenses.

Also, there are a number of state programs for saving for college expenses. Many of these allow for larger contributions. Some are very flexible in terms of college choice. Many of these are relatively poor investment vehicles with constraints you may not like. To many options and details to say anything more than you may want to investigate this option.

Dividends due not count as earned income.

Finally, if you own a business you may have an option to hire your child or relative if you can make a reasonable case that they are doing something (copying, cleaning the office...) for their pay. I sometimes wonder if all those kids that show up in local TV ads are "working" to get an IRA.