Yes, a minor can have an IRA. Federal tax law sets no minimum age for owning one; the only real requirement is earned income. Because a child cannot sign a brokerage contract, an adult opens a custodial IRA in the child’s name and manages the investments until the child reaches the age of majority. The money in the account belongs to the child from day one.
Earned Income Is the Only Real Gatekeeper
The IRS cares about compensation, not age. Wages from a W-2 job qualify, and so do net earnings from self-employment like babysitting, tutoring, lawn care, or selling crafts online.1Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs) – Section: What Is Compensation? Allowances, birthday money, gifts, and interest on a savings account do not count. A child whose only “income” is a $50 check from grandma is not eligible.
If the child works for a family business, the pay has to be reasonable for the work actually done. Paying a seven-year-old $50 an hour to sweep a stockroom and routing the wages into an IRA is the kind of setup the IRS will unwind. Keep a log of dates, hours, tasks, and amounts paid. For self-employment income with no W-2, those records are the only proof if the IRS asks.2Internal Revenue Service. Earned Income, Self-Employment Income and Business Expenses
A Roth IRA Almost Always Wins for a Minor
A Roth is funded with after-tax dollars, and qualified withdrawals in retirement come out tax-free.3Internal Revenue Service. Roth IRAs A teenager earning a few thousand dollars a year usually owes little or no federal income tax, so the “lost” deduction a traditional IRA would provide is worth almost nothing. In exchange, decades of growth escape tax entirely.
A traditional IRA gives you a deduction now but taxes withdrawals as ordinary income later.4Internal Revenue Service. IRA Deduction Limits That trade rarely makes sense for a 14-year-old in a near-zero bracket. The Roth carries a second advantage that matters at this stage of life: contributions can be pulled back out at any time without tax or penalty.
How Much a Minor Can Contribute
The IRS applies a lesser-of rule. For the 2026 tax year, the cap is $7,500 or the child’s total earned income for the year, whichever is smaller.5Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 A child who earned $2,000 from a summer job can contribute up to $2,000.
Here’s the part families often miss: the money that lands in the account does not have to be the child’s own paycheck. A parent or grandparent can write the check. The only requirement is that the child earned at least that much in compensation during the year.6Internal Revenue Service. Retirement Topics – IRA Contribution Limits So a teenager can spend their summer earnings however teenagers spend money, and a parent can quietly deposit an equivalent amount into the Roth. That’s legal and common.
Opening a Custodial IRA
Federal tax law treats a custodial account as a valid IRA, with the custodian serving as trustee.7Office of the Law Revision Counsel. 26 U.S. Code 408 – Individual Retirement Accounts Not every brokerage offers them, but the major ones (Fidelity, Schwab, Vanguard) do. The account is opened in the child’s name with an adult listed as custodian.
You will need, for both the minor and the custodian:
- Social Security numbers, required under federal customer identification rules.8Financial Crimes Enforcement Network. Interagency Interpretive Guidance on Customer Identification Program Requirements under Section 326 of the USA PATRIOT Act
- Legal names and dates of birth.
- Physical addresses for tax documents.
Most brokerages accept the application online and open the account within a few business days. Name a successor custodian in case the primary custodian cannot continue. Fund the account by linking a bank account, and code the contribution to the correct tax year, especially if you are contributing in January or February for the prior year.
Getting Money Out Before Retirement
The concern that the money is locked up for decades is largely overblown with a Roth. Contributions can come back out at any time, at any age, for any reason, with no tax and no penalty. The IRS treats Roth distributions as coming from contributions first, then conversions, then earnings.9Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) A child who contributed $12,000 over four years and watched the balance grow to $15,000 can still pull $12,000 back out without owing anything.
Earnings are stricter. To take earnings out tax-free, the distribution must be qualified: the account must have been open at least five tax years, and the owner must be at least 59½, disabled, or deceased.9Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) A 22-year-old cashing out earnings will owe income tax on that portion plus a 10% early withdrawal penalty.
Penalty Exceptions Young Adults Actually Use
The 10% penalty on early earnings withdrawals is waived in a few situations that tend to come up in a young person’s life:
- Higher education costs (tuition, fees, books, supplies, room and board at an eligible school) avoid the penalty, though earnings are still taxed as income.10Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
- A first home purchase, up to $10,000 in earnings, subject to a lifetime cap.10Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
These exceptions apply only to the earnings portion. Contributions come out clean regardless, so a young adult facing a college bill can often withdraw everything they put in without any tax consequence at all.
Does the Child Have to File a Tax Return?
Opening a Roth IRA does not, by itself, create a filing obligation. Roth contributions are not reported on a return, and Form 8606 is not required just for making them.11Internal Revenue Service. Instructions for Form 8606
The child may still need to file for reasons unrelated to the IRA. Net self-employment earnings of $400 or more trigger a filing requirement and self-employment tax for Social Security and Medicare.12Internal Revenue Service. Topic No. 554, Self-Employment Tax Income tax kicks in if earned income exceeds the dependent’s standard deduction. For 2026, that deduction is the greater of $1,350 or earned income plus $450, capped at the regular single-filer amount of $16,100.13Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill A teenager earning $5,000 from a summer job gets a $5,450 standard deduction and owes no federal income tax on those wages.
Effect on Financial Aid
Retirement accounts, including a child’s IRA, are excluded from the FAFSA asset calculation. The balance will not reduce need-based federal aid. That is a real advantage over a taxable brokerage or a UGMA/UTMA custodial account, both of which count as the student’s assets and are assessed at a higher rate.
The CSS Profile, used by many private colleges for institutional aid, also excludes retirement balances from its asset section. Two caveats: annual contributions can show up as income adjustments, and any distributions taken during college may appear as income on the next year’s aid application. If financial aid matters, avoid withdrawing from the IRA during the college years.
What Happens When the Child Turns 18 (or 21)
The custodial arrangement ends when the child reaches the age of majority, which ranges from 18 to 21 depending on the state and the type of custodial account. The brokerage then retitles the account in the young adult’s name alone. The former custodian loses all authority over trades, investments, and withdrawals. The young adult signs new account agreements and takes full control.
This handoff happens whether the young adult is ready for it or not. Families who plan to open one of these accounts often use it as a teaching tool: discussing investment choices along the way so the transfer feels like a continuation rather than a surprise. After the transfer, the young adult can keep contributing as long as they have earned income, change the investments, or withdraw contributions. The account is entirely theirs.