Opening an IRA for 18 year old

[clobber]

Quick question,

DD turned 18 in 2019 and has earned income from 2018 at age 17. She just tried to open a Roth, but was denied. It seems she is in a catch-22:

1) She is now 18 and must open her own account (fine by me)
2) Since she is 18, can not open a custodial account.
3) Money she earned in 2018 (when she was 17) would have to go into a custodial account. Which can not be opened.


So - it seems she has no way to get her 2018 contributions into a new Roth account. Does that seem right?

 

[pb4uski]

I would try another provider or bump it up the chain of command with whatever provider that you are dealing with... there are not any age restrictions on opening a Roth IRA... anyone with earned income can.

https://www.nerdwallet.com/blog/investing/why-your-kid-needs-a-roth-ira/

There are no age restrictions. Kids of any age can contribute to a Roth IRA, as long as they have earned income.

 

[FlaGator]

Haven’t read the refs, but that doesn’t sound right. If the law in your state allows it, open a custodial account with 21 as the hand over age.

 

[gwraigty]

She should be able to open up a Roth IRA without any problem. I'm not familiar with the concept that her earned income from when she was 17 would have had to have been deposited in a custodial account. The fact is that she's 18 now. Worst case scenario, she can open a Roth IRA now, and then wait until she has qualifying earned income from this point on to fund it.

 

[euro]

My son opened one at Schwab without any issues. Just try other providers until you find one that is willing to do it. I do recommend Schwab (form many reasons), but there have to be many others that will do it.

 

[pb4uski]

She should be able to open up a Roth IRA without any problem. I'm not familiar with the concept that her earned income from when she was 17 would have had to have been deposited in a custodial account. The fact is that she's 18 now. Worst case scenario, she can open a Roth IRA now, and then wait until she has qualifying earned income from this point on to fund it.

She can open a Roth IRA now, and contribute up to the amount of her 2018 earned income before the 2018 tax filing deadline of April 15th.

 

[gwraigty]

She can open a Roth IRA now, and contribute up to the amount of her 2018 earned income before the 2018 tax filing deadline of April 15th.

I agree that she should be able to do this. It shouldn't matter how old she was at the time she earned the money. OP, what provider gave this as a reason for the denial? Inquiring minds want to know...

 

[SecondCor521]

Schwab happily and easily opened custodial Roth IRAs for my three kids when they were in their early- to mid-teens. They were also willing to open them with very low initial deposits (like $100 or something).

I'd suggest trying Schwab, and then if you feel particularly strongly about it, let the other company know that they may have lost out on your daughter's business for the next 60 years.

 

[clobber]

I agree that she should be able to do this. It shouldn't matter how old she was at the time she earned the money. OP, what provider gave this as a reason for the denial? Inquiring minds want to know...

This was T. Rowe Price. I've been very happy with them for many years. Might try and call again and speak to someone else.

However - it is interesting if you go to their website (not logged in) and try to open a Roth IRA. When you get to the screen that asks for your age, if you put in 18 it will tell you that you can put in max $0 for 2018. However, if you say your age is 19, it will happily let you put in $5500.

 

[pb4uski]

If when you speak to someone else they still won't allow it then ask to speak to a manager.... perhaps it is TRP company policy not to allow minors to open a Roth IRA.

Amazingly, there is no minimum age requirement to open a Roth IRA. The only requirement is that the child have “earned income”.

 

[gwraigty]

This was T. Rowe Price. I've been very happy with them for many years. Might try and call again and speak to someone else.

However - it is interesting if you go to their website (not logged in) and try to open a Roth IRA. When you get to the screen that asks for your age, if you put in 18 it will tell you that you can put in max $0 for 2018. However, if you say your age is 19, it will happily let you put in $5500.

If you call again, ask them why their online application says that. I don't understand the reasoning behind that. As an example, what about someone who turned 18 last year, had earned income from a weekend job throughout the year, and just now decided to open a Roth IRA to take advantage of contributing for 2018 before the April 15th deadline?

If when you speak to someone else they still won't allow it then ask to speak to a manager.... perhaps it is TRP company policy not to allow minors to open a Roth IRA.

According to the OP, her 18-year-old is considered a legal adult for the purpose of opening a Roth IRA.