What Is A Custodial Roth IRA, And How Does It Work?

Shawn Plummer

CEO, The Annuity Expert

What is a Custodial Roth IRA?

A Custodial Roth IRA is a retirement savings account for minors. It’s managed by an adult, usually a parent or guardian until the child reaches adulthood. The account allows the minor to invest in a Roth IRA, even though they’re under 18. It follows the same tax rules as a standard Roth IRA: contributions are made with after-tax dollars, and withdrawals during retirement are tax-free.

Key Features

  • Eligibility: Minors with earned income.
  • Contributions: Made with after-tax dollars.
  • Tax Advantages: Earnings grow tax-free; withdrawals in retirement are also tax-free.
  • Control: Managed by an adult until the minor reaches adulthood.

Examples of Contributions

  • A 15-year-old with a part-time job earns $3,000 in a year. They can contribute up to $3,000 to their Custodial Roth IRA.
  • If the minor earns more than the annual Roth IRA contribution limit, they can only contribute up to the limit.
What Is A Custodial Roth Ira

Benefits of a Custodial Roth IRA

  1. Early Financial Learning: Teaches minors about savings and investing.
  2. Tax-Free Growth: Investments grow tax-free over time.
  3. Flexibility: Can be used for education, first home purchase, or retirement.

Comparison of Custodial Roth IRA and Traditional Roth IRA

FeatureCustodial Roth IRATraditional Roth IRA
EligibilityMinors with earned incomeAnyone with earned income under the income limit
Tax TreatmentContributions after-tax, withdrawals tax-freeSame as Custodial Roth IRA
ControlAdult controls until age of majorityIndividual control
PurposeEarly start on retirement savings for minorsRetirement savings for adults


The Custodial Roth IRA is an excellent tool for minors to begin saving for retirement, gaining financial literacy, and enjoying tax-free growth. It bridges the gap between childhood and financial responsibility, offering a head start in the journey of savings and investments.

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Frequently Asked Questions

What are the benefits of opening a Custodial Roth IRA for a minor?

Tax-free growth, early investment, and potential for long-term compound growth.

Who can contribute to a Custodial Roth IRA?

The adult custodian on behalf of the minor.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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