opening a Roth IRA for employed teenagers

[BoogieShoe]

Hey, I have an 18 and 20 year old. I am 48 (wife is 49) and we both do backdoor Roth IRAs. I am considering opening a Roth IRA for each of my kids. They both have earned income for '24 and will for '25.
Question:
1) Is this a good idea? My mom opened one for me in the late 1990s when I was in college and I will always be eternally grateful.
2) If my son earned $3500 in '24 working part time at an after school job (high school) and my daughter earned $2000 in '24 working at the college bookstore while being a full time student, can I still max both accounts with $7,000 each? Am I limited to only contributing $3500 and $2000, respectively?

I have learned so much from you people. Thanks for any feedback you can give me.

[randomwalk]

1. Yes, it's a great idea and can be an excellent opportunity to educate your children about the bigger picture of retirement savings and investing as well as the specifics of asset allocation. My 14-year old daughter had her first summer job last year and we matched her earnings by contributing to a Roth IRA.

2. You can only contribute the lesser of $7000 or their earned income, so you are limited to $3500 and $2000.

Here's some more info from Fidelity, where we opened her account: https://www.fidelity.com/retirement-ira/roth-ira-kids

And some other threads on similar questions: https://www.google.com/search?sitesearc ... h+for+kids

[CAsage]

Since both of these are over 18, they need to open their own accounts! One can, of course, be sitting right there directing. We originally opened a Minor's Roth account when our teen was first gainfully employed (high school, ~2 years) and when they turned 18, the account transitioned to a regular Roth. And yes, matching their earnings (or the same $$) is a great way to launch their investments. Each account is limited to each person's earned income annually, or a max of $7k under 50.

[retired@50]

Hey, I have an 18 and 20 year old. ... I am considering opening a Roth IRA for each of my kids.

Since they are both adults in the eyes of the law, you'll need to work with your kids to accomplish this.

It's a good idea, and a great way to help get them started on a lifetime of saving and continued learning about the world of financial matters.

Regards,

[livesoft]

One doesn't need to work with these young adults to do this. I told my daughter, "Go to the local Fidelty office and open a Roth IRA." Young adults can learn how to do things by themselves. I think they get a sense of accomplishment that they could do this without their parents helping them. One can gift them money if they don't have it immediately available, but they will only be able to contribute the amount already discussed in this thread to their Roth IRA.

Another benefit of the above is that they won't be influenced by their friends' parents who run the local Edward Jones office. I make no apologies if the OP is the one running the local Edward Jones office.

[CyclingDuo]

Hey, I have an 18 and 20 year old. I am 48 (wife is 49) and we both do backdoor Roth IRAs. I am considering opening a Roth IRA for each of my kids. They both have earned income for '24 and will for '25.
Question:
1) Is this a good idea? My mom opened one for me in the late 1990s when I was in college and I will always be eternally grateful.
2) If my son earned $3500 in '24 working part time at an after school job (high school) and my daughter earned $2000 in '24 working at the college bookstore while being a full time student, can I still max both accounts with $7,000 each? Am I limited to only contributing $3500 and $2000, respectively?

I have learned so much from you people. Thanks for any feedback you can give me.

Yes, it is a good idea! Have them both open an IRA account and contribute for 2024. As others have pointed out, their contributions will be limited for 2024 to no more than they earned. The rule is not "Go Max or Go Home!", so getting lesser amounts into these accounts is fine and dandy.

We did the same for our children around those ages due to earned income from paid internships and summer jobs. It helps build the savings muscle and discipline to begin their journey of setting aside a percentage of their income each and every year. Our kids now both have nearly a decade of contributions into their accounts and are way ahead of where we were at their ages.

CyclingDuo

[White Coat Investor]

Hey, I have an 18 and 20 year old. I am 48 (wife is 49) and we both do backdoor Roth IRAs. I am considering opening a Roth IRA for each of my kids. They both have earned income for '24 and will for '25.
Question:
1) Is this a good idea? My mom opened one for me in the late 1990s when I was in college and I will always be eternally grateful.
2) If my son earned $3500 in '24 working part time at an after school job (high school) and my daughter earned $2000 in '24 working at the college bookstore while being a full time student, can I still max both accounts with $7,000 each? Am I limited to only contributing $3500 and $2000, respectively?

I have learned so much from you people. Thanks for any feedback you can give me.

1. Yes, THEY should open themselves a Roth IRA. Too late for you to do it without their knowledge/approval. You can gift them an amount equal to the contributions so they can use "their" money for something else. We call this the "daddy match" at my house. We just had to decide when it stops. We decided upon college graduation.
2. No. Contributions are limited to earnings.

[svho]

The kid can open one regardless if the parents claim the kid as a dependent?

Lets say my son earned $6K last year. His mom will claim him as a dependent. He can open the account and make contribution up to $6k?

His birthday is May 2006.

Thanks,
TT

[GenawithanE]

Yes, they can open their own Roth even if they are a dependent. They might not be eligible for the Savers Credit but they probably don’t have any income tax liability so nothing lost.