Can I Open a Roth IRA for My Adult Child?

A Roth Individual Retirement Account (IRA) is a retirement savings vehicle, allowing individuals to contribute money on which taxes have already been paid. While contributions do not provide an upfront tax deduction, investment growth within the account accumulates tax-free. When qualified withdrawals are made in retirement, after age 59½ and provided the account has been open for at least five years, these distributions are also entirely tax-free. Many parents seek to support their adult children’s financial futures, often wondering if they can directly open or contribute to a Roth IRA on their behalf. Understanding the specific regulations governing these accounts is necessary to navigate this process effectively.

Understanding Roth IRA Eligibility for an Adult Child

For an adult child to be eligible for a Roth IRA, two conditions must be met. The individual must have earned income for the year at least equal to the amount they contribute. Earned income includes wages, salaries, professional fees, bonuses, commissions, and net earnings from self-employment. However, certain types of income, such as rental income, interest, dividends, pension income, or unemployment benefits, do not qualify as earned income for Roth IRA contribution purposes.

Eligibility is also determined by the adult child’s Modified Adjusted Gross Income (MAGI). The Internal Revenue Service (IRS) sets income phase-out limits that can reduce or eliminate an individual’s ability to contribute. For a single filer in 2025, a full Roth IRA contribution is permitted if their MAGI is under $150,000, with contributions phasing out completely at $165,000 or more. Individuals whose income falls within these phase-out ranges may only contribute a reduced amount.

How Contributions Work

A Roth IRA must be legally owned by the adult child, not the parent. Parents cannot directly contribute funds into an adult child’s Roth IRA. Instead, a parent can provide a monetary gift to their adult child, and the adult child then uses that gifted money to make their own Roth IRA contribution.

The maximum total annual contribution an individual can make to all their IRAs, including Roth IRAs, is subject to specific limits. For 2025, the annual contribution limit is $7,000 for individuals under age 50. Those aged 50 or older can make an additional catch-up contribution of $1,000, bringing their total limit to $8,000. Contributions for a given tax year can be made up until the tax filing deadline of the following year, April 15th.

Exceeding these limits or contributing without sufficient earned income can result in an “excess contribution.” The IRS imposes a 6% excise tax on excess contributions for each year the overage remains in the account. Excess amounts and any earnings attributed to them should be withdrawn by the tax return due date. Alternatively, an excess contribution can be applied towards the following year’s limit, though this may still incur the 6% penalty for the year the excess occurred.

Opening and Funding the Account

Once an adult child meets the eligibility criteria and understands the contribution rules, opening a Roth IRA involves several steps. Roth IRAs can be established with various financial institutions, including brokerage firms, banks, and mutual fund companies. Many online platforms offer a streamlined process for opening these accounts.

To open the account, the adult child will need to provide personal information. This includes their Social Security number, date of birth, current address, and bank account details. The institution may also require information about the individual’s employment and income.

After the account is established, funding it can be done through electronic transfers from a checking or savings account. Setting up recurring contributions is also a common practice, allowing for consistent savings throughout the year.