Have you ever thought about opening an IRA for your minor children?  It’s a great way to save for their future.

A Custodial IRA is an Individual Retirement Account that a custodian (typically a parent) holds for a minor with an earned income. Because the account is for a child, once the Custodial IRA is open all assets are managed by the custodian until the child reaches age 18 (or 21 in some states).

Before you set up your child’s account, there are some things you need to know:


Your child must have “earned income” to contribute. Earned income is money received as pay for work performed, such as wages, salaries, bonuses, commissions, tips, and net earnings from self-employment. This is also referred to as “active income” as opposed to “passive income” from sources such as investing, rental properties, and earning royalties.


Opening an account as custodian for a minor means the custodian is the person who we must identify.  You would need to provide a copy of your driver’s license.  You would also need to provide your child’s Social Security number as well as a copy of your child’s school photo ID card.


 The custodial parent will sign on behalf of the child for the IRA as follows:

Jim Doe (child’s name on signature line)

Jane Doe signing on behalf of Jim Doe (date) (below signature line)


An IRA can help your child (or grandchild) save for retirement but that’s not all.  That’s right, the IRA is not just for retirement.  There are exceptions to withdrawal penalties.  These IRA withdrawal exceptions to the 10% penalty rule mean your child can use their IRA to pay higher education expenses and as a first-time home buyer.  As a result, your children can use these savings before they retire to pay for some of the major financial milestones in their lives.

To learn more, reach out to us at uDirect IRA Services at info@uDirectIRA.com.