There's no age limit for opening a Roth IRA, but there are income and contribution limits that investors should be aware of before funding one. Let's look at the pros and cons. Children of any age can contribute to a Roth IRA, as long as they have earned income. Even people with high incomes who can't directly fund a Roth IRA can use this strategy, also known as a clandestine Roth IRA.
Convincing a child to hand over their hard-earned money to invest in a Roth IRA can be difficult, but remember that as long as the child has earned income from work to be able to receive Roth IRA contributions, it doesn't matter where the contributions come from. One way to do this is to establish a Roth IRA with custody, or what Fidelity is known as a Roth IRA for children and, more generally, as a Roth IRA for minors. The distribution rules of a Roth IRA can also help you if you intend to leave your IRA to your heirs. In addition, at the time of retirement, the account owner must have had a Roth IRA open for at least 5 years, counting from the start of the first calendar year in which a Roth IRA was opened.
Roth IRA providers usually require an adult to open and manage a Roth IRA with custody on behalf of a child. In addition, when it's time to take advantage of your retirement age savings, certain eligible distributions from a Roth IRA will be tax-exempt, unlike distributions from a traditional IRA. A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. Despite the potential to accumulate significant savings, freezing money in a Roth IRA may not appeal to a child who is more concerned about having money to go to the movies or buy video games.
