Written By Jenny Kiffmeyer, J.D – The Retirement Learning Center
“My client claims he heard parents and grandparents can now fund Roth IRAs for children/grandchildren. He wants to set up Roth IRAs for several minor children—is this permissible?”
Highlights of the discussion
The issue of establishing and funding Roth IRAs centers on earned income (IRC §408A)—not age. An individual of any age with earned income up to a certain level can fund a Roth IRA. Earned income is defined as wages or self-employment income from services performed. If the child does not have earned income, they cannot fund a ROTH IRA.
Thus, a minor with earned income (e.g., from a lemonade stand) could fund a Roth IRA. One hurdle, however, is setting up the account. Most states do not allow minors to enter into contracts. Therefore, a parent or legal guardian would need to sign opening documents to establish the Roth IRA on behalf of the child.
It could be your client heard about new IRA-like accounts (“Trump Accounts”) for children under age 18 created under the “One Big Beautiful Bill,” which became Public Law No: 119-21 (see Title VII, Chapter 2, Section 70204 for details).
Conclusion
An individual of any age with earned income up to a certain level can fund a Roth IRA. For minors, however, most states do not allow them to sign contracts. Therefore, a parent or legal guardian would most likely need to establish the account.
