A little less than a year ago, my wife landed a position with a wealth management department of a large bank. It took awhile, but finally their compliance department said we could not keep my 15-year-old daughter’s Custodial Roth IRA at its then current custodian. We would have to move it to their custodian. So I contact that financial company.
Now we are talking about less than $500 in the account (Time value of money, little deposits over time will grow into a huge amount!).
The company that her compliance department required me to move the account to cannot accommodate a custodial Roth IRA. The other part of that broker dealer can, but my daughter’s balance is WELL below their $250K minimum balance requirement.
So I begin to hunt for a bank who can open this account, just sock it away in a money market account IRA until she is 18. Don’t like missing the potential growth of a mutual fund investment, but it is what it is.
Well, after having conversations with 6-7 banks, both local and national, not one of them could open this type of account. One even offered to open the IRA in her name, I could make deposits to it, but NO ONE could make withdrawals or close the account until my daughter reached 18!
Wow. See, because my daughter is under the age of 18, she cannot sign agreements like an IRA agreement. So, a custodian (like Dad) is the signer, acting on her behalf, but the custodian has no ownership in the account. Simple, but beyond the ability of most banks to do.
A Roth IRA can be opened by or for ANYONE with an earned income, even if they are an infant (baby in a commercial? Just drop that $5K commission check into a custodial Roth IRA earning 8% for the next 60 years and it grows to almost $600,000.00 tax free)!
For the time being, my daughter’s Roth IRA was moved out of the protective umbrella of Roth and into a minor savings account. She is working one day a week, and we are tossing HALF of her pay into this retirement account. She won’t even have the maximum (currently $5500) annual investment limit when she turns 18, but starting her out so she lives on half her income can turn her into an early retirement superstar!
Stay tuned!
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