What is a Custodial IRA?
Opening a Custodial IRA for your child can put them on the path to strong future savings
A Custodial IRA is an IRA held by a custodian on behalf of a minor with earned income. In most cases, this involves a parent holding the IRA for a child. Before the child reaches age 18 (21 in some states), the custodian holds the account, but funds and earnings belong to the child. At age 18 (21 in some states) the account transfers to the child. This is a great way for minors to start saving money before they are able to hold their own IRAs.
Custodial IRAs aren't just useful for getting a head start on retirement savings. Funds and earnings from these accounts can be used for large future expenses like college tuition or a home purchase. Both Custodial Roth and Custodial Traditional IRAs are available. Account benefits for these IRAs are the same as their non-custodial versions.
Custodial IRAs at a glance:
- Choose between a Traditional IRA or Roth IRA
- Transition to the child when they reach the "age of majority" in your state (usually 18 or 21)
- Give your child a head start on saving for college, their first home, or retirement
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Common Questions
The information presented in Common Questions is for the purpose of general education and does not address the investment nor legal considerations of any individual. The opinions are of Matisse Capital.