Roth IRA for teens

[justdisneyme]

I'd like to get my kids started with a Roth IRA and I'm looking for a recommendation on what company to use. I'm thinking of Vanguard or T. Rowe Price (saw them listed on Suze's site)...any one have experience with either? Any other recommendations? Thank you!

 

[HeyIt'sMe]

We don't have a Roth IRA for our DD but both my DH & I have Roth IRAs at T. Rowe Price. We like them. We opened our accounts online and it was very easy to do. We have automatic deposits made every payday. And we are happy with the performance of the funds we picked.

BTW - I love Suze!

 

[QVCshopper]

Well, I used to work for Vanguard, so you know who I favor. Great company, great funds, great people. The majority of my assets are there, although my newest 401k and kids' 529s are at Fidelity. But, Vanguard offers the lowest expense ratios and opening the account will be so easy! My hubby's parents opened an IRA for him when he was a teen. Very thoughtful!

 

[clh2]

Can I "add on" to the OP's question?

Where can a Roth get opened up where the minimum investment isn't huge? With "ideal" being $250 or $500. We would love to get DD started on this path - but with college coming in the fall, a $250 or $500 would be easier than the minimums I've seen with Fidelity, Vanguard, or TRowe Price.
Thanks!

 

[scottmel]

I have had a Education ROTH for DD12 since she was born that I contribute the max to (I beliver 2k for education)and now have a ROTH IRA For her that has a small contribution limit. I THINK that amount is 400 or 500 based on what she can "earn" legally a year without having to pay taxes. Sounds like peanuts but will be worth over 100K when she is 60 if I contribute the 400 or 500 max a year. Can't beat that? I am allllll about Roth savings and education IRAs. And ALLLL of mine are thru Vanguard. I was FIDELITY but transferred to Vanguard.

 

[QVCshopper]

Can I "add on" to the OP's question?

Where can a Roth get opened up where the minimum investment isn't huge? With "ideal" being $250 or $500. We would love to get DD started on this path - but with college coming in the fall, a $250 or $500 would be easier than the minimums I've seen with Fidelity, Vanguard, or TRowe Price.
Thanks!

Vanguard's Target Retirement Funds and Star Funds have a $1K minimum.

 

[BadgerGirl84]

When I was shopping around for my Roth IRA right out of college, my primary driver was finding an option where I didn't need to plunk down $1000 to get started. I picked T.Rowe Price because at the time, the minimum contribution was quite low if you committed to monthly automatic payments. Not sure what the min. contributions are now--this was 5 years ago.

I'll likely be moving my Roth over to Vanguard because I just like that company as a whole and like that they have very, very low expense ratios. Can't say enough good things about Vanguard.

 

[Jeff_G]

You can only put money into a Roth IRA in you have an earned income (you can use spousal income if married filing jointly). So your children would need to be earning an income and then they can only contribute either $5,000 or 100% of their earnings which ever is less.

 

[imsayin]

now have a ROTH IRA For her that has a small contribution limit. I THINK that amount is 400 or 500 based on what she can "earn" legally a year without having to pay taxes. Sounds like peanuts but will be worth over 100K when she is 60 if I contribute the 400 or 500 max a year. Can't beat that? I am allllll about Roth savings and education IRAs. And ALLLL of mine are thru Vanguard. I was FIDELITY but transferred to Vanguard.

Does she earn any money? You can't fund the account if she hasn't earned any money.

 

[scottmel]

Does she earn any money? You can't fund the account if she hasn't earned any money.

Yeah you can! She could be a full time babysitter or pet walker for all anyone knows.

 

[Jeff_G]

Yeah you can! She could be a full time babysitter or pet walker for all anyone knows.

As long as you have documentation to back that up should you be audited, and have paid taxes on that income. Remember during an audit situation your are guilty until proven innocent.

Roth IRA contributions are reported to the IRS based on SSN and I'm sure their computer system tries to match up reported earnings.

Not saying this is a 100% chance of getting an audit but the IRS has a lot more money, time and lawyers then you, best not to tickle the sleeping dragon!

 

[cornflake]

Yeah you can! She could be a full time babysitter or pet walker for all anyone knows.

As above, if she's earned enough to fund an IRA, she'd earned enough to have to have reported it and the IRA is pegged to the SSN.

 

[imsayin]

Yeah you can! She could be a full time babysitter or pet walker for all anyone knows.

If she is, then yes she can. If you are making it up, than no she cannot. The IRS likes things to match up and when they don't, they will question you. Like the previous poster mentioned, you must have documentation to back it up.

 

[justdisneyme]

Thank you for all the thoughtful replies! My oldest has been working (with a real paycheck) for a couple years now so I want to get him started. I actually meant to start this last year so I don't want to let another year slip by. He is willing to make deposits but I also want to help him with that until he gets a full time job once he finishes college.

Thanks again for all your replies - we are going with Vanguard.

 

[Sadie22]

Thank you for all the thoughtful replies! My oldest has been working (with a real paycheck) for a couple years now so I want to get him started. I actually meant to start this last year so I don't want to let another year slip by. He is willing to make deposits but I also want to help him with that until he gets a full time job once he finishes college.

Thanks again for all your replies - we are going with Vanguard.

You can give your child money for other things so that his earnings can go into the IRA.

 

[Jeff_G]

Ok now that we have some of that cleared out of the way, I would encourage your children to put away a set percentage of their paycheck for their retirement. Get them into the habit now of saving a little each paycheck. A good boss of mine when I was first starting out told me increase your 401k contribution every pay raise until you are maxing it out.

Also you can contribute for the previous year until April 15 (April 17th 2012) of the following year.

 

[clh2]

Ok now that we have some of that cleared out of the way, I would encourage your children to put away a set percentage of their paycheck for their retirement. Get them into the habit now of saving a little each paycheck. A good boss of mine when I was first starting out told me increase your 401k contribution every pay raise until you are maxing it out.

Also you can contribute for the previous year until April 15 (April 17th 2012) of the following year.

Is it REALLY 4/17 for 2012? DD's 18th b-day is 4-14, and we'll be out of town that weekend in a small town in Wisconsin at a state-wide meet. The date being 4-17 helps TREMENDOUSLY as far as logistics go.

And yes..verifiable income...just need to figure out the best option for a low minimum - and one that you don't need to make a monthly conttibution to.

 

[Jeff_G]

Yes April 15th 2012 falls on a Sunday so they would normally extend to Monday however Monday April 16th is Emancipation Day in the District of Columbia so we get until April17th 2012 to file income tax returns. So Roth IRA contributions for 2011 can be mad up until April 17.

Vanguard will allow you to specify 2011 or 2012 for the contribution until April 17th. However I think you might need to open the account in 2011 to get the 2011 option for contributions. You might check with Vanguard to make sure....

Vanguards Target Retirement funds and their STAR fund all have the lower $1,000 initial purchase, then you can repurchase in increments of $100 any time after that with no monthly obligation...
Most of their other funds are $3000 minimum initial purchase. There are other companies with lower initial purchase options but you need to watch their fees.

for DW and my Roth we saved in a bank account until we have the $1000 for the initial purchase.


ok I have to add this part...
*** Note this post does not constitute finical advise or any recommendations you need to research any stock / mutual fund before investing... to understand the risks...