Roth IRA for kid with earned income?

Hi all!  I'd like to open a Roth IRA for my teenager, since this is his first year with earned income.  I'd love to hear from others who have done this (or anyone else with knowledge/ideas) re: best companies to deal with, pros/cons, alternate recommendations, etc.

 

Thanks in advance! 😀 

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  • I did this for my daughter a few years ago. It was very easy. I went with Vanguard.

    Pro is that she's getting in early; con - none that I can think of.

    The only thing I have to remember to watch is making sure she doesn't contribute more than she makes in income annually. She can contribute 100% of her earned income if it's less than the max IRA limits (i.e., if she earns $4000 a year, she can put all of that in the IRA - but I can't add to that from my income (allowances, etc) to max that out).

    I set her up with an automatic monthly contribution from her savings account (dollar cost averaging), and some years she didn't work much, so we had to remember to dial back the contribution.

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  • This is a great idea! One suggestion: you can sit down with her and play with a retirement calculator to show her how much more she'll have if she funds that early. Those calculators can be really fun and motivating!

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  • Great plan! Vanguard because of extremely low maintenance fees. Costs matter, especially over decades of saving/investing. Look at their “Target Date Funds” that start out more aggressive (more stocks) and automatically rebalance over time. A set-and-forget fund, just keep adding to it.

    but no more than his total earned income for the year, up to the limit the IRS sets each year. 

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  • Thanks for the input, everyone!  I've heard good things about Vanguard from quite a few people, so will definitely be checking them out.  As someone who didn't start saving for retirement until I was about 31, I'm really excited to help him get started early - especially since he's been so responsible with working.

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  • I am also planning on opening a ROTH  IRA account at Vanguard for our teen who got his first job this year.

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  • With Vanguard's brokerage accounts, you can contribute even if you don't have the minimum to start buying a fund. It'll sit in the money market settlement account until enough has accumulated, and then you can start buying. After you have an initial position in a fund, you can continue to buy with no minimums. A far away Target Date fund would be good with a $1000 buy-in.

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  • I opened a Roth IRA for my 15 yr old about 5-6 months ago. I chose Fidelity because they have good funds, low fees, and it can all be done online. I, personally, use Vanguard, and love it. However, you have to open a Roth for minors with them with paperwork. I preferred the convenience of opening online with Fidelity.  I opened with $1000, and just bought her ETFs. 

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