How old does one have to be to start a ROTH?

[Guest derykb]

My daughter is 13.5 y.o, and during financial year 2003 made ~ 500.00 baby-sitting.

I figured that starting to contibute to a ROTH, whilst she is paying virtually no tax, would be a great way to start.

Is she allowed to open a ROTH?

Thanks

Deryk

[Appleby]

There is no minimum or maximum age requirement for establishing and contributing to a Roth IRA. Some financial institutions may have age restrictions in place- for some, this translates into not allowing individuals under a certain age to establish an IRA...for others, it means the individual’s (the minor's) guardian must establish the IRA on behalf of the minor- this incudes signing the documents used to established the IRA and selecting/directing investments.

[Guest Tim_Myth]

Along similar lines, I would like to start some kind of fund for my 4 children. They are too young to work, so they have no income (I'm betting the IRS doesn't count allowances ). Does this mean I can't open a Roth IRA for them with $500 each?

Also, is it really a Roth IRA I would want to start for them? I want to teach them to save for retirment, and if I open an account of some type for them, they will probably contribute when they are old enough. I'm not overly concerned with risk, as 60+ years of interest can do wonders under almost any circumstance. I want to stay away from demand accounts (like savings accounts), so they (and I!) aren't tempted by the money at any point, but having an account that would allow them to take loans for a house or college would be nice. I don't have a huge cash savings myself, so the initial contribution needs to be low (under $1000).

[Lame Duck]

IRA contributions must be made from some form of earned income of the IRA participant (spousal IRA excepted) so you would not be able to open an IRA for your children unless they had some form of income. That said, many people pay their children for chores around the house, e.g. making beds, cleaning room, etc. That would constitute payment for services rendered and would be earned income eligible for contribution to an IRA.

[John G]

If you kids are not models, and are so young that they can't have a newspaper route or babysitting job.... you will have to wait.

However, you may want to investigate the variety of college savings plans that are possible for children of any age. My kids are in college know so I have not been paying attention to all the details - so perhaps you might want to do a Google search on "college savings plans". There is a mini-IRA version. There are also state sponsored plans. Frankly, some of them are just miserable investments with poor returns and too many restrictions. However, the trend seems to be moving toward more flexibility and good old competition is forcing the weaker plans to improve their returns.

Perhaps someone else at this site can lay out those options.

If none of these makes much sense for you, consider this option. You can always open joint taxable accounts with you and your child and then invest in either a mutual fund (preferably a tax managed fund) or individual stocks that will be held for many years. When these assets are sold, you will have long term capital gain treatment.