To put it another way, yes. Many parents and grandparents contribute to IRAs on behalf of a minor, often through IRA Gold custodians. There is no requirement that the funds contributed to a minor's IRA have to be their “own money”. The minor only needs to have eligible compensation sufficient to support the contribution. You may or may not be able to request a deduction from your contributions to a traditional IRA depending on whether you or your spouse are covered by an employer-sponsored retirement plan, your tax-reporting status, and your modified adjusted gross income (MAGI).
For example, you can't give money to dependent children or elderly people who didn't have any earned income to put in an IRA. The graph illustrates how the amounts of annual contributions to the Roth IRA can turn into impressive sums over many years. While Roth IRAs have no age limit, traditional IRAs limit how old you can be and still contribute, regardless of whether you are declared a dependent or not. Convincing a child to hand over their hard-earned money to invest in a Roth IRA can be difficult, but remember that as long as the child has earned income from work to be able to receive Roth IRA contributions, it doesn't matter where the contributions come from.
With an extended time horizon, even the most modest contributions to a Roth IRA can turn into substantial savings over time, thanks to the power of tax-free compound growth. Whether you want to contribute to an individual retirement account on behalf of your child or help one of the parents you declare as a dependent save some additional money for retirement, knowing the eligibility rules helps you maximize the tax benefits of IRAs. On the other hand, the Roth IRA can be a wise choice from a tax point of view, since Roth IRA contributions are distributed before any gains and are always exempt from taxes or penalties. The Internal Revenue Service does not require dependents to strictly use their compensation income to fund their IRAs.
Please note that the minor must have obtained sufficient eligible compensation to support the IRA contribution. A Roth IRA is more flexible than other retirement accounts because contributions can be withdrawn at any time. That flexibility is balanced by stricter rules for Roth IRA earnings or return on invested contributions. As long as they have sufficient compensation to justify the IRA contribution, the IRS doesn't care where the money going to the IRA comes from.
For example, a Roth IRA allows the account owner to withdraw 100% of what they have contributed at any time and for any reason, without taxes or penalties. In all likelihood, having a low income and not participating in an employer-sponsored retirement plan would probably be eligible to make contributions to the Roth IRA or tax-deductible contributions to the traditional IRA.
