Last Updated on July 5, 2026 by stlplace
Google search AI overview shown below
Yes, you can open a Custodial Roth IRA for your child, provided they have earned income (e.g., W-2 wages or self-employment like babysitting). You manage the account as the custodian until they reach the age of majority (18 or 21). [1, 2, 3]
Key Rules to Know
- The Income Requirement: Your child must have documented earned income. Routine allowance or cash for chores does not qualify. [1, 2, 3, 4]
- Contribution Limits: You can contribute up to $7,000 or 100% of the child’s total earned income for the year, whichever is less. (If your child earns $1,500, the maximum contribution is $1,500). [1, 2]
- Tax Benefits: Contributions are made with after-tax dollars, meaning money grows tax-free and all withdrawals during retirement are tax-free. [1, 2]
- Penalty-Free Withdrawals: Your child can withdraw their contributions (the principal amount) at any time, penalty-free. [1, 2]
I did the google mainly because my older daughter asked about it – she told me she will make $1,000 from her internship this school year. And she wants to save some and spend the rest. I told her that she can save it in a Roth IRA (I didn’t do google then), and I can give her the “spend money”. And what’s funny is our younger daughter heard the conversation and she commented “what about me”? I said I will give you the same amount ($1,000) – now it looks like I cannot put the money into my younger daughter’s Roth IRA right away – because she doesn’t have a job.
Also, (Fidelity) How unused 529 assets can help with retirement planning
Last but not least: trump accounts vs other accounts and tax implications (google search) and AI overview are shown below:
Trump Accounts are special, child-focused accounts designed for long-term wealth building. Unlike other tax-advantaged vehicles, they are taxed as ordinary income upon withdrawal and lack front-end deductions, making them generally less tax-efficient than 529 plans or traditional taxable brokerage accounts unless you are seeking specific retirement incentivization. [1, 2, 3, 4, 5]
Comparing Trump Accounts to common alternatives reveals significant differences:
Trump Accounts (Growth & Withdrawals)
- Contributions: Made with after-tax dollars; no state or federal tax deductions. (Contributions are not considered taxable income for the recipient, however). [1, 2, 3, 4]
- Growth: Taxes on investment gains are deferred until the money is withdrawn. [1, 2]
- Withdrawals: Distributions are taxed as ordinary income. If withdrawn before age 59½, you may owe a 10% excise penalty. Once the child reaches 18, it functionally operates like a Traditional IRA. [1, 2, 3, 4]
529 Plans (Education & Partial Retirement)
- Contributions: Made with after-tax money, but many states offer significant state income tax deductions.
- Withdrawals (Education): Completely tax-free at the federal and state levels when used for qualified education expenses.
- Withdrawals (Retirement): Up to $35,000 of unused 529 funds can be rolled over into a Roth IRA for the beneficiary over their lifetime, completely tax-free. [1, 2]
Custodial Accounts (UGMA/UTMA)
- Contributions: No limits or deductions; money is owned by the child but managed by a custodian.
- Growth & Dividends: Taxed annually at the child’s tax rate (subject to the “kiddie tax”), which is often lower than the parents’ rate.
- Withdrawals: Can be liquidated without penalty prior to age 18 (or 21, depending on the state), allowing you to easily tap into the funds for any of the child’s needs.