<p>During this tax year my son earned $500.00 working on a film–he’s first income in the movie biz. I’d like to open a Roth IRA for him. Are any of you familar with an IRA that will allow an intial minimum investment of $500.00? No-load would be the best. Any pitfalls I should be aware of in doing this?</p>
<p>tsdad,
I started a Roth for my daughter two years ago when she earned her first money. I had to search around awhile because not all companies would start one for someone under 18. My financial advisor recommended American Funds, it’s a no load, but I’m not sure about the minimum investment for opening up an account as I put in 1k initially. I thought about it for quite awhile, and it seems like the ideal long-term gift for your children. I have a federal pension with cost of living increases and health care to look forward to (hopefully soon!), but I know my kids won’t be so lucky. Although the amounts I can put in are not large, they have the time factor working for them. Also, it’s a good way to put away money for the kids that will be exempt from FAFSA concerns. The main thing is to keep good records of their earnings. I also hope that if I kickstart the process, my kids will continue to save as much as they can throughout their lives, they’ll need to!</p>
<p>if you go no load, watch the fees! you are talking about a super long term investment, so if the annual fees are slightly higher in the no load, you might not save all that much.</p>
<p>Entomom:</p>
<p>From a Federal retiree–thanks. I’m not sure the pain of 30 years plus was worth it, but it is a lot of money so no complaints. I have looked at the American funds but most of them require $2,500 to start and he only earned $500.00. I was thinking about one of those horizon funds that are based on when you retire.</p>
<p>Wbow–thanks for the warning.</p>
<p>Check the Vanguard group. I have both of my kids’ Roths in there, but I’m not sure how much they started with (they are employed in my business).</p>
<p>We opened Roth IRA’s for our two teenage sons after their summer 2004 jobs. I tried to set it up with Fidelity, but they insisted it was illegal for kids under 18. T. Rowe Price was happy to do it. We used one of their Retirement Funds (2040), but the minimum to open the account was $1000. Luckily they had both earned about $1100 that summer. You can add to it in increments as small as $100 and both boys contributed again after they worked this latest summer. </p>
<p>How exciting for them to have $2000+ already saved for retirement at 17 and 15!</p>
<p>tsdad,
I just looked at my records, I put $500 each into Growth Funds (Capital World & Growth Fund of America), so I guess the Horizon Funds demand a higher start up amount. Yes, I’m in year 28 of my 30, and am just glad that I opted to stay with the old retirement plan. Sounds like you’re only semi-retired; I’m open to that option, but only if it’s to do something that’s entirely different! Goodl luck with the IRA search.</p>
<p>For small contributions in a given year: If you do the scenerios and numbers, based on current tax regs (thankyou GWB) you’d be better off NOT in either ROTH or traditional IRAs. Not going into the details, but has to do with capital gains/loses and reduced taxation of dividends. </p>
<p>Traditional thinking gets you traditional results. Explore what the 20%'ers are doing.</p>