I'm Under 18. Can I Open a Roth IRA?

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  • Roth IRAs allow you to enjoy tax-free investment gains and withdrawals.
  • You can fund an IRA with earnings of yours if you're under 18, but you'll need an adult to help you open your account.

It's not so uncommon for teenagers to hold down a job, whether it's scooping ice cream at a local shop over the summer or working for a small business in town after school. If you're a teen earning money, you should definitely take the opportunity to put some of that cash into a savings account so you have a rainy day fund at your disposal. But it also pays to save some of that money for retirement.

Of course, when you're a teen, retirement may not exactly be on your radar. But the longer an investment window you give yourself for retirement, the more wealth you stand to accumulate over time. And so if you're a teenager with a job, you may want to consider putting some of your earnings into a Roth IRA.

Not only can a Roth IRA serve as a retirement account, but you can tap a Roth IRA penalty-free to pay for higher education. So if you put your earnings into a Roth IRA, it could double as a retirement fund as well as a college fund.

But while you can fund a Roth IRA if you're under 18 as long as you have earned income, you generally can't open one on your own. So you'll need to enlist the help of an adult to get that account set up.

An option worth exploring

Roth IRA contribution limits change from year to year. In 2023, you can contribute up to $6,500 to a Roth IRA if you're under the age of 50. But to be clear, you can't contribute more than what you earn.

So let's say you earn $5,500 at a job this year, but you're also gifted $1,000 for the holidays from your generous relatives. Even though you're allowed to contribute up to $6,500 to a Roth IRA, all of that has to come from earnings. So in your case, your 2023 contribution would max out at $5,500.

Meanwhile, minors generally cannot open any sort of account on their own that allows investments to be bought and sold. So if you want to open a Roth IRA, you'll most likely need an adult to serve as a custodian. That adult could be a parent, older sibling, uncle, or grandparent -- there are many options.

To be clear, though, your custodian won't have the right to the money in your Roth IRA. Rather, that money is yours.

Now, you may not love the idea of tying your money up in a Roth IRA. But let's say you contribute $5,500 at age 17 and end up retiring at age 67.

The stock market, over the past 50 years, has delivered an average annual 10% return, as measured by the performance of the S&P 500 index. If your $5,500 investment generates that same 10% return, in 50 years, it will be worth around $645,000. Now that's a lot of money.

Fund that IRA while you can

Working during your teenage years may not always be a given. You might reach a point where your studies get more intense and you need to focus on school. Or, you may decide to spend a summer taking classes rather than working.

As such, if you have earned income now, it pays to consider putting it into a Roth IRA. And while you'll need help to do so if you're under 18, the option is very much on the table.

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