Roth IRAs are great deals and we set goals to fully fund ours each and every year (preferrably EARLY in the year to maximize growth.)
Bo, that lucky dog, is a minor. But he did have earned income in 2005. That allowed me to open up a custodial Roth IRA for him and deposit $1,000 in it. (He earned $1,200 last year.) We could have contributed up to the limit of his earned income. So why is he so lucky?
Even if nothing else is contributed, and the money earns $10% (more below), he'll have close to $3,000 in ten years. If he kept it invested for 40 years, that would be a nice little package.
I chose to go with T. Rowe Price to open the custodial Roth IRA. Not every broker will handle these types of accounts. I went with TRP for several reasons:
1. I own TREMX which was been the #1 diversified emerging market fund for the past three years; I've made 130% since I bought this fund two years ago.
2. They allow an initial $1K investment, and $100 monthly contributions.
3. The fund can be rolled over into a brokerage account when Bo is 18.
4. The same fund manager that manages #1 also manages the fund I selected: PRMSX.
This has made Bo more interested in saving. If he doesn't let it ride until retirement, he also has options for a first-time home purchase or qualified education expenses. One more stretch for other parents of teens out there, but if you have the means, and your teen earned income last year (or this year)---the Roth IRA for minors could make more lucky teen dogs.
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