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What is a custodial Roth IRA?
A custodial Roth IRA is a retirement account owned by a child with earned income but managed by a custodian until they turn 18 or 21, depending on state laws where the minor lives.
The account follows the same rules as a Roth IRA: contributions are made with after-tax dollars, which grows tax-free in the account through investments, and is withdrawn tax-free in retirement.
Key rules for custodial Roth IRAs
- Age is not a limit. Even babies, if they have earned income, can have and contribute to a Roth IRA.
- Earned income is a requirement. If income is reportable on a W-2 or another income tax form, the individual will be eligible for a Roth IRA.
- Annual contribution limits apply. As with any other IRA, the limit for contributing to a custodial Roth IRA is $7,500 in 2026 or the total of the minor's earned income for the year, whichever is less.
Reasons to consider a custodial Roth IRA
Opening a Roth IRA for your child could help jumpstart their preparation for retirement. When it comes to investing, compound interest is a major factor to help grow money, but it's heavily dependent on time. Investing early is a huge advantage that is hard to beat.
Here are some other reasons why a custodial Roth IRA could be worth opening:
- Potentially lower tax bills in the present. Depending on how much the minor has earned that year, there may be little to no income tax liability. And once contributions are invested in the Roth, it grows and can be withdrawn in retirement tax-free, which can be especially beneficial in the future.
- Easy withdrawal of contributions. Like a normal Roth IRA, contributions to a custodial Roth IRA can be withdrawn at any time, for any reason. It can also be withdrawn tax-free, since that money was already taxed.
- Can be used for other purposes, including education and home buying purposes. Withdrawals of investment earnings from a Roth IRA for qualified education expenses, such as tuition, is allowed. While the withdrawal won't be subject to a 10% penalty, it will still incur taxes. When it comes to a first-home purchase, Roth IRA account owners can withdraw up to $10,000 in earnings, tax- and penalty-free.
What is a custodial Roth IRA?
A custodial Roth IRA is a Roth individual retirement account that is owned by a child but controlled by an adult until the minor reaches legal adulthood. The rules of a custodial Roth IRA follow the same parameters and IRS guidelines as a typical Roth IRA.
» Learn more: What is a custodial account?
Best custodial Roth IRAs
Of the online brokers that NerdWallet reviews, the following currently offer custodial Roth IRAs. Note that the star ratings are for the brokerage overall, not their custodial Roth IRA specifically.
| Overall brokerage score | Learn more | |
|---|---|---|
| Fidelity | 5.0 | |
| Charles Schwab | 4.8 | |
| E*Trade | 4.3 | |
| Vanguard | 4.4 |
» Check out our top picks for the best Roth IRA accounts
Custodial Roth IRA rules
There's no age limit. Even babies can contribute to a Roth IRA: The hurdle to opening this account is about earned income, not age.
The child must have earned income. If a kid has earned income, they can open and contribute to a Roth IRA. Earned income is defined by the IRS as taxable income and wages — money earned from a W-2 job or from self-employment gigs such as babysitting or dog walking. (If you want to contribute to your child's Roth IRA or match your child's contributions, that's fine as long as they have at least as much earned income as the total contribution amount.)
There are contribution limits. The Roth IRA contribution limit is $7,500 in 2026 for individuals under age 50 or the total of earned income for the year, whichever is less. For example, if a child earns $2,000 babysitting, they can contribute up to $2,000 to a Roth IRA.
How to open a custodial Roth IRA for kids
Your child’s earned income is what makes them eligible for the Roth IRA, but a parent or other adult will have to help open and then manage the account. Many Roth IRA providers don't offer custodial Roth accounts, but some do. When choosing a provider, look at the fund fees or management fees to help pick the best one for your child.
You can set up an account online. You'll need to provide Social Security numbers for you and your child, birthdates and other personal information.
» Looking for a different account type? Explore other investment accounts for kids
5 reasons why a Roth IRA can be right for minors
Now that you know whether your kids can have a Roth IRA, you might be wondering if they should. Aside from the momentum of investing early, there are several reasons why a Roth IRA, in particular, can be a good choice for children:
1. Contributions can be withdrawn at any time
Retirement accounts are known sticklers about distributions — many charge a 10% penalty on money taken out before age 59 ½. That’s tough on kids, who have years to go before reaching retirement age.
But a Roth IRA is different. The money contributed to the account can be withdrawn at any time and used for anything from a toy car to a first real car.
That flexibility is balanced by stricter rules for the Roth IRA account’s earnings, or the return on contributions that are invested. Distributions of investment earnings may be taxed as income, penalized with a 10% early distribution tax or both.
Those two rules make the Roth IRA a nice middle ground between kids who want easy access to their cash and parents who want to make sure some of that cash is saved for the future.
» Get the full details on Roth IRA early withdrawals
2. More time means more growth
There’s a fun phenomenon called compound interest that works like this: Given time, invested money earns more money. Some adults have 30 or 40 years until retirement once they start investing; a kid who starts earlier has the benefit of much more. If your kids leave their money in the Roth IRA until retirement, they could be looking at 50 or more years of investment growth, completely tax-free.
Is waiting that long a hard sell? Maybe mention that a one-time contribution of $7,500 in a Roth IRA — with no additional contributions at all — would grow to almost $150,000 in 50 years (assuming a 6% investment return and monthly compounding).
3. Investing can trump saving over the long term
That type of growth may not happen in a plain savings account, which is the more traditional choice for kids because it’s flexible and doesn’t require earned income. Unlike in a Roth IRA, birthday money is welcome in a savings account.
But a Roth IRA for kids allows your children to choose investments, which, over the long term, can lead to the kind of growth described above. There are trade-offs, of course: Most notably, your kids could lose the money they invest in a Roth IRA, though history tells us that’s unlikely to happen if they stick to a diversified portfolio over a long period of time.
» Maxed out the Roth IRA contribution limit? Here are the best savings accounts for kids
4. The tax advantages are prime for kids
The Roth IRA works like this: Because there’s no tax break for putting money into the account, qualified distributions in retirement are not taxed. All that growth we keep talking about is earned completely tax-free if your kid follows the rules for distributions.
The Roth’s tax treatment is especially valuable when your time horizon is long and your current tax rate is low, and both of those are true for children. In fact, the earnings of most kids are so low that they pay little to no income taxes, meaning they avoid taxes on contributions, too.
5. The money can be used for more than retirement
Yes, a Roth IRA is a retirement account. The ideal goal is to sit on the account and allow it to accumulate a nice pot of money over time. But it’s worth pointing out that a Roth IRA isn’t just a retirement account.
Again, contributions can be pulled out at any time for any reason. But there are also a few loopholes that can get your kid access to the investment earnings before age 59 ½. These include:
- After the Roth IRA has been funded for five years, your child can take out up to $10,000 in earnings to help buy a first home, tax- and penalty-free.
- Roth IRA earnings can be used for qualified education expenses, such as college tuition. Earnings distributed will be taxed as income, but there will be no penalty.
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