What are custodial IRAs?
A Custodial IRA is an Individual Retirement Account that a custodian (typically a parent) holds for a minor with an earned income. You can open either a Custodial Roth IRA or Custodial Traditional IRA, and the respective account benefits and rules apply.
What is the difference between a custodial IRA and a traditional IRA?
In a traditional IRA, contributions are tax-deductible, and distributions are taxed as ordinary income. However, a Roth custodial IRA account is better suited for a child due to its unique tax benefits.
Who offers custodial Roth?
Vanguard, Fidelity, and Schwab all offer custodial Roth IRAs. With Vanguard you can’t open this type of account online. You’d have to call them at 800-551-8631 during normal business hours. Buying an all-in-one Vanguard Target Retirement Fund requires $1,000 minimum investment.
Can I open a custodial Roth IRA for my child?
Kids of any age can contribute to a Roth IRA, as long as they have earned income. A parent or other adult will need to open the custodial Roth IRA for the child. A Roth IRA is more flexible than other retirement accounts because contributions can be withdrawn at any time.
Can I transfer a Roth IRA to my child?
Your adult child can use the money you give her from your IRA withdrawal to fund her own IRA up to the limits prescribed by law, provided she has earned income for the year that is equal to the amount of your gift. You can’t transfer, or roll over, assets from your IRA into an IRA for your child.
How do I prove my child’s income for a Roth IRA?
Your child has to have earned income during the tax year in order to contribute to a Roth IRA. Any earned income qualifies. The income can be babysitting money, full time employment, or even being paid for chores. For this reason, your 14-year-old’s babysitting money would qualify as earned income.
Do you have to prove income for a Roth IRA?
Traditional and Roth IRAs allow you to save money for retirement. Hence, many retirement investors looking to secure tax-free retirement wealth generally turn to the Roth IRA. When it comes to establishing an IRA, one must generally have earned income in order to be eligible to make a contribution.
What is the minimum age to start a Roth IRA?
age 18
What is the minimum age to withdraw from a Roth IRA?
age 72
How can I reduce my RMD on my taxes?
There are a number of ways to reduce—or even get around—the tax exposure that comes with RMDs. Strategies include delaying retirement, a Roth IRA conversion, and limiting the number of initial distributions. Traditional IRA account holders can also donate their RMD to a qualified charity.
Does RMD affect Social Security benefits?
Although RMDs may not be a major factor in the Social Security claiming decision, every year more retirees are subject to taxation of their Social Security income and should be aware of this issue.
Where do you put RMD money?
While you can’t reinvest the RMD in a tax-advantaged retirement account, you can stash it in a deposit account or reinvest it in a taxable brokerage account. If your liquid cash cushion is sufficient, consider tax-efficient investing options, such as municipal bonds.