Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: “I have a custodial Roth IRA for my daughter. What do I do when she turns 18? Do I have to transfer it into an account that’s hers to control?”
A: There’s no need to transfer funds to a new account, but you do need to do a little legwork here. First, contact the financial institution to begin the process of transitioning the account into her control. You will likely need to provide proof of her age via a birth certificate, and there will be paperwork for you both to sign, which will effectively change the account from a custodial to an individual account.
Now that she’s over the age of 18 and the sole legal account holder, your daughter can contribute to the Roth IRA, so long as she has earned income from a job or self-employment. Roth IRAs are one of the best savings vehicles for retirement (more on them here), thanks in part to their tax-free growth and withdrawals.
In addition to legally making the account shift, now is also an opportunity to impart a little financial wisdom to your daughter. Talk with her about the benefits of the Roth IRA and explain why she should keep contributing. If the convo sparks an interest in investing, InvestingFixx, HerMoney’s investing club for women, could be a way to foster that (not to mention, a great mother-daughter activity!).
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