A Roth IRA offers tax-free growth and tax-free withdrawals in retirement, which can benefit young adults with long time horizons. You can help open a Roth IRA for an adult child if they have earned income and the account is in their name. Starting early allows more time for growth. A financial advisor can help review eligibility rules and contribution limits before the account is opened.
Can You Open a Roth IRA for Your Adult Child?
While parents can help fund the account, an adult child must open a Roth IRA in their own name. The IRS requires the account holder to have earned income, such as wages, tips or self-employment earnings. Income from part-time work, freelancing or a small business generally qualifies, while gifts, dividends and allowances do not.
For 2026, the annual contribution limit is $7,500. Individuals age 50 or older may contribute an additional $1,100 as a catch-up contribution, for a total of $8,600. Contributions cannot exceed the child’s total earned income for the year. For example, if a 24-year-old earns $6,200 during the year, that amount is the maximum total contribution allowed, even if a parent provides the full contribution.
Parents may provide the contribution as a gift, but the Roth IRA must remain in the adult child’s name. The child is the account owner and retains control, which aligns with IRS requirements.
Rules for Contributing to a Roth IRA for Your Adult Child
Roth IRAs come with clear eligibility requirements. Following these rules ensures contributions remain valid and penalty-free. The following are some of the rules you’ll want to be aware of:
- Earned income requirement: The account holder must have earned income from employment or self-employment. Passive income, such as dividends, interest or rental income, doesn’t count.
- Ownership rules: For adults (18 or older), the Roth IRA must be opened in their name. Parents cannot open a custodial IRA for an adult child.
- Gifting Contributions: Parents can fund contributions as a financial gift, but the total cannot exceed the child’s earned income or annual contribution limit.
- Income limits: Roth IRA eligibility phases out for higher earners. In 2026, single filers with a modified adjusted gross income (MAGI) between $153,000 and $168,000 and married couples between $242,000 and $252,000 are subject to partial limits. Most young adults fall below these thresholds, but high earners should track income carefully.
How to Help Your Adult Child Start a Roth IRA
Setting up a Roth IRA for your child is straightforward, but consistency and education are key. Here are some steps to help your child open a Roth IRA:
- Choose a brokerage or bank: Research financial institutions that offer Roth IRAs with low or no account minimums, a wide range of investment options and user-friendly online platforms.
- Set up automatic contributions: Encourage your child to automate monthly transfers from their checking account to their Roth IRA. Even small recurring contributions can make a big difference over time.
- Match their contributions: Just as an employer match motivates workers to save, parents can match what their child contributes. For example, if your child contributes $1,500, you could gift another $1,500 to reach the annual maximum.
- Select investments wisely: You and your child can work together, or with a financial advisor, to choose a diversified mix of investments, such as index funds or target-date funds. These options provide growth potential without requiring constant oversight.
- Review progress together: Make it a yearly tradition to review contributions and performance. It’s an excellent opportunity to discuss financial goals and reinforce long-term saving habits.
Tax and Legal Considerations
Roth IRA contributions are made with after-tax dollars, meaning there’s no tax deduction upfront. However, qualified withdrawals in retirement are tax free if the account has been open for at least five years and the account owner is age 59½ or older. Parents who help fund a Roth IRA should also account for gift tax rules.
For 2026, individuals may gift up to $19,000 per recipient without filing a gift tax return. If total gifts to a child exceed that amount in a calendar year, IRS Form 709 must be filed to report the excess. Filing the form does not usually result in taxes owed, as amounts above the annual exclusion generally reduce the lifetime gift and estate tax exemption rather than triggering immediate tax.
Roth IRA withdrawal rules also matter. Contributions can be withdrawn at any time without tax or penalty. Earnings withdrawn before age 59½ or before the account meets the five-year rule are typically subject to income tax and a 10% penalty. Exceptions to the penalty include qualified education expenses, a first-time home purchase up to $10,000, disability or death. Keeping records that separate contributions from earnings helps avoid issues when withdrawals occur later.
Benefits of Opening a Roth IRA for an Adult Child
Helping your child start a Roth IRA provides long-term financial advantages that can last decades, such as:
- Tax-free growth: A Roth IRA grows tax-free and, under certain conditions, offers tax-free withdrawals in retirement, too. Starting early gives the account more time to compound—potentially turning small contributions into significant savings.
- No required minimum distributions (RMDs): Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs). Your child can leave the funds untouched for as long as they like, allowing investments to grow throughout their lifetime.
- Accessible contributions: While it’s best to leave contributions untouched, they can be withdrawn at any time without taxes or penalties. This makes a Roth IRA flexible enough to serve as both a retirement and an emergency savings vehicle for young adults.
- Building strong financial habits: Starting early fosters responsible financial behavior. Your child learns about saving, investing, and delayed gratification, skills that compound in value just like their investments.
When a Roth IRA May Not Be the Right Fit
A Roth IRA can be useful for many young adults, but it is not always the best starting point. The account works best when contributions can stay invested for many years and when the account holder can afford to leave the money untouched. In some situations, other financial priorities may take precedence.
If your child expects to be in a lower tax bracket later in life, the tax-free withdrawals of a Roth IRA may offer less benefit than a traditional IRA, which provides a tax deduction at the time of contribution. A traditional IRA can reduce current taxable income, which may be more relevant during years when cash flow is tight or earnings fluctuate.
Short-term financial stability also matters. If your child has irregular income, limited savings or upcoming expenses such as rent deposits, medical costs or transportation needs, setting aside cash in an emergency fund may be more practical than locking money into a retirement account.
For students or recent graduates focused on education costs, a 529 plan may be more appropriate. These plans allow tax-free withdrawals for qualified education expenses and can support tuition, fees and other costs. A Roth IRA can still play a role later, once income becomes more consistent and education expenses are no longer the primary focus.
Bottom Line
You can help an adult child open a Roth IRA, but the account must be in their name and they must have earned income. Contributions grow tax free, and qualified withdrawals in retirement are also tax free. Starting early allows decades for compounding, even with modest annual contributions. The account remains under the child’s control, which encourages responsibility around saving and investing. Over time, this structure can support long-term wealth building without ongoing tax drag.
Retirement Planning Tips
- A financial advisor can help you set up a retirement account, select investment choices and create a contribution strategy based on your overall financial plan and goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to diversify your retirement plan with additional investments, here’s a roundup of 13 to consider in 2026.
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