Roth IRA and Minimum Age

[Guest cls78730]

Where do I go to open a Roth IRA for a person under 18 years old?

[John G]

Not every potential custodian will accept accounts for children under 18 because of problems they perceive with custodial arrangements for minors. That seems to be more of a custodian specific issue rather than an IRS issue since the federal regs make no distinction for young age as long as the "earned income" requirements are met. In brief, the EI requirements are met by anyone getting a paycheck and many others with other types of income from mowing lawns, babysitting, modeling, etc.

Who to see? Well, last time I checked, Etrade said no while Schwab said yes. Generally you can pick a mutual fund, bank, internet broker, or traditional broker. Make a few calls to companies that suit your needs. You may find it easier to start with firms with which you already have accounts. Perhaps other readers of this thread can add a list of YES custodians.

I would suggest that since this account will be a tax shelter for many decades that you look toward stocks (aka equities) rather than interest bearing CDs or bonds. A very broad based mutual fund like one that tracks the overall market would work very well. Look for a home with either zero or under $15/year annual fees and low imbedded expenses. A good place to start is with Vanguard funds. You can often get a firm to waive the annual fees on IRA accounts by just asking, especially if you have other business with the firm or the IRA assets are large. You might choose to start with a custodian that is convenient and then transfer the funds a few years down the road.

A child IRA is a tool for letting your child get started learning about investments. Nothing bad about learning early on that markets move both up and down. Good luck with this project.

[papogi]

Scottrade is OK with Roth IRA's for minors, as well. Depending on the amount of earned income that the minor has, this will affect the investment choices (the minimum requirements still apply in order to set up the account in the first place).