How to Open a Roth IRA for Kids

Last year, I hired my kids to model for this blog. That evidence is all over this site. Their earnings from this gig is modest, though a tad better than the $6 from their lemonade stand last summer. So, I thought I’d open a Roth IRA for the kids and make their contributions for 2019, right before the July 15th deadline.

This year, the Federal Tax filing deadline has been pushed to July 15, 2020 due to the COVID pandemic and with it, some other deadlines have been pushed down, too. These include:

• Contributions to Individual 401(k) accounts for 2019
• Contributions to HSA for 2019
• Contributions to Traditional and Roth IRA for 2019. This includes the ability to do the Backdoor Roth IRA until the deadline.

Where to Open a Roth IRA for Kids

I use mostly Vanguard ETFs for my investments, so Vanguard is my default choice of brokerage house. However, since I was running so close to the deadline, I decided to give them a call to find out how long it would take to get the account set up. And it’s a good thing I did. Vanguard requires some paperwork to be mailed in for the account to be set up. This would take more time than I had.

I then called up Fidelity customer service and they said that it was an instantaneous, online process. That made the decision easy. I was going to open my first Fidelity account. Well, technically, my children’s accounts.

Here’s the rundown of the process. It was quick and painless.

Fidelity Roth IRA for Kids: Open an Account

This is Fidelity’s Homepage and the “Open An Account” tab is right on top.

Clicking on that takes you to this list of the most commonly opened accounts with them. But you want to click on “All Accounts” to get to Roth IRA for kids.

The additional retirement account options has Roth IRA for Kids listed as an option. Click on “Open Online” and get started.

Fidelity Roth IRA for Kids: Custodian Information

As the custodian of your kid’s account, you need to provide Fidelity with some basic information about yourself.

If you are new to Fidelity, it includes some personal information.

And some employment information- which is actually required by law.

Fidelity Roth IRA for Kids: Minor’s Information

This is followed by basic information about the child for whom the account is being set up.

The UGMA/UTMA Statute State, generally where you live, determines the age when you kid can legally take control of the account.

There is a prudent reminder that you can open a Roth IRA for a kid only if she has earned income- not gifted money.

Sweep Account

The next step is to choose where to house the cash you deposit into the account until you’ve invested it. I picked the money market fund. This is the default option in my other accounts, too- like my taxable brokerage account.

You agree to the Terms and Conditions.

And acknowledge that everything you’ve stated is true.

And there, your kid’s Roth IRA is now open. It gives you an account number.

Fidelity Roth IRA for Kids: Funding the Account

The next step is to deposit funds into the account.

You can move money from a different retirement account, brokerage account or bank account.

Here I will pick the first option- of transferring from a bank account. You can transfer from your own bank account- it does not need to be the child’s account.

Choose between one time or recurring transfers from a bank or brokerage account. You can also do the transfer via paper form.

Link Bank Account

You link your bank account from where you would like to transfer funds. Electronic funds transfer is the way to go.

Since I’m new to Fidelity, I need to link a new bank account and provide details on it.

The bank account was instantly linked. This is different from my usual experience, where they make a couple of tiny deposits into my bank account and have me come back and verify those amounts in order to confirm and link the bank account.

Fidelity Roth IRA for Kids: Make the Contribution

You have to specify which tax year you are making the contribution for. Since this was for earnings in 2019, the relevant tax year is 2019. Even though I’m making the contribution in 2020.

You verify all the information is correct.

Review and confirm the same.

And hit submit.

The funds take a couple of days to reach the account. Once it does, you can invest it however you like.

Always remember to log off and close your browser window.

Thank you for reading. Have you opened a Roth IRA for a kid? Where did you choose to open it and what has your experience been?