The Roth IRA: A Teen Superpower

The story: Jade’s summer money

Jade and a grown-up sit at a kitchen table with a custodial Roth IRA form and a small tree that stands for growth.

1. Narrator: Jade earned $2,000 (example) lifeguarding this summer. A grown-up mentions a Roth IRA.
2. Jade: I’m 16. Can I even have a retirement account?
3. Narrator: Yes, with earned income. A grown-up opens a custodial Roth IRA and manages it until Jade is an adult.
4. Adult: I’ll match what you put in, as long as the total isn’t more than what you earned.
5. Narrator: Roth money goes in after tax. If Jade follows the rules, the growth can come out tax-free in retirement.
6. Jade: So summer money now could grow for 50 years.

What you’ll learn

1. You need earned income

   To put money in a Roth IRA, you need earned income from a job or gig. Allowance, gifts and birthday money don’t count. Keep records of what you earn, especially gig pay with no paystub.

2. Custodial Roth for minors

   Under the age of majority in your state, you need a grown-up to open a custodial Roth IRA. The account is yours. The grown-up manages it until you’re an adult.

3. The yearly cap

   Each year, the total going in, including any family match, can’t be more than what you earned. It also can’t top the yearly limit of $7,500. Whichever is less is the cap.

   Example: Sam earned $1,500. Even with a family match, Sam’s Roth can take at most $1,500 that year.

4. Tax now, tax-free later

   Roth money goes in after tax. Follow the rules, and growth can come out tax-free in retirement. A traditional IRA flips it: you may get a tax break now and pay tax later. There are rules for taking money out early.

Key words

IRA

an individual retirement account you open yourself, not through a job

Also called: individual retirement arrangement

Roth IRA

an IRA where money goes in after tax and can come out tax-free later

tax-free growth

earnings that aren’t taxed when you take them out, if you follow the rules

Common questions

Can I take money out if I need it?

There are rules. In general, what you put in can come out more easily than the growth. Taking growth out early can mean tax and a penalty. The fact card links to the IRS rules.

What if my gig pays in cash?

Cash pay from real work still counts as earned income. Keep a simple log of dates, jobs and amounts, because you may need to report it.

Remember this

Earned it? A Roth can grow it tax-free.

Try it: Run the summer-pay numbers

1. Open the retirement calculator linked in this lesson.
2. Enter the sample teen: current age 19, current savings $6,000 (3 summers of $2,000 in a Roth, example) and $0 a month.
3. Look at the estimate at retirement. Then try current age 29 with the same $6,000.
4. Or use the talk prompt: “Could I open a custodial Roth?”

Run the sample teen’s summer pay through the retirement calculator embed, or use the talk prompt “Could I open a custodial Roth?”.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• IRA yearly limit

  $7,500

  Total you can put into all your IRAs (traditional and Roth) in a year, if you have that much earned income

  As of 2026

  Source: IRS.gov(opens in a new tab)

• Roth IRA income limits and withdrawal rules

  Source: IRS.gov(opens in a new tab)