Custodial IRA Calculator

Estimate the long-term growth of a custodial IRA for a minor. This calculator projects the account's value from the child's current age through retirement, illustrating the powerful effect of decades of tax-advantaged compounding. See how a small, early start can grow into a substantial nest egg.

This tool is for parents, grandparents, or guardians who want to give a child a financial head start. A custodial IRA can be a powerful wealth-building vehicle, but it requires the minor to have earned income. If you're comparing options, see how this differs from a standard Roth IRA Calculator for adults or a 529 plan for education. For a broader view, use our main retirement calculator.

The results show a potential balance at age 18 (when the child gains control), a projected balance at retirement, total contributions versus total growth, and a year-by-year growth chart. You'll also see a "Growth Potential Score" that summarizes the power of your starting point.

Begin with the "Child Information" section. Enter the child's current age and their total earned income for the year. The earned income is critical, as contributions cannot exceed what the child legitimately earns from work.

Next, move to "Contribution Details." Input the annual amount you plan to contribute on their behalf. This amount will be automatically limited by their earned income or the annual IRA limit ($7,000 for 2026), whichever is lower. Select the account type—for most minors, a Roth IRA is the preferred choice. Then, set your assumptions for the average annual investment return and the age the child might begin withdrawals in retirement.

For more detail, open the "Advanced Options." You can set a growth rate for the annual contribution, which models the child's income and your contributions increasing over time. You can also model the impact of withdrawing a portion of the funds at age 18 for college expenses, which can be done from a Roth IRA penalty-free on the contributions portion.

Child's Current Age

The child's age determines the length of the investment timeline. The earlier you start, the more years the money has to compound, which has an enormous impact on the final balance. Contributions can only be made while the child is a minor (under 18 or 21, depending on the state).

Child's Earned Income

This is the most important rule for a custodial IRA. The child must have legitimate, documented earned income from a job, such as babysitting, mowing lawns, or working in a family business. Contributions for the year cannot exceed the child's total earned income or the annual IRA limit, whichever is less. For example, if a child earns $2,500, you cannot contribute more than $2,500 to their IRA that year.

Annual Contribution

This is the amount you intend to save in the custodial IRA each year. The calculator will automatically apply the earned income and IRS limits. To see how your own savings goals compare, check our guide on how much to save for retirement each month.

Account Type

You can choose between a Roth or Traditional IRA. A Roth IRA is funded with after-tax dollars, and qualified withdrawals in retirement are tax-free. A Traditional IRA may offer a tax deduction now, but withdrawals are taxed as ordinary income. For most children with little to no income, a Roth IRA is far more advantageous as they are in a 0% tax bracket now, securing decades of tax-free growth. Learn more about Roth vs. Traditional IRAs.

Expected Annual Return

This is the average rate of return you expect the investments within the IRA to generate each year. A long-term average for a diversified stock portfolio is often estimated between 7% and 10%, but this is not guaranteed. A more conservative portfolio might use a lower number.

Withdrawal Age

This is the age at which the account holder plans to start taking distributions in retirement. A common retirement age is 65 or 67, but this can be adjusted to model different scenarios, like early retirement through the FIRE movement.

Contribution Growth Rate

This advanced setting allows you to model an annual increase in the contribution amount. This is useful if you expect the child's earned income to grow as they get older, allowing for larger contributions over time.

College Withdrawal Plan

This option models withdrawing 25% of the account balance at age 18 to help pay for qualified higher education expenses. While possible, especially with a Roth IRA (where contributions can be withdrawn tax- and penalty-free), it reduces the long-term retirement balance. An inherited IRA calculator deals with different withdrawal rules entirely.

This calculator uses a year-by-year projection to model the growth of the custodial IRA.

First, it determines the maximum allowable contribution for each year. This is the lesser of three values: the "Annual Contribution" you enter, the "Child's Earned Income," and the annual IRA contribution limit ($7,000 for 2026).

The projection starts at the child's current age. Each year until the child turns 18, the calculator adds the effective contribution to the balance. It then applies the "Expected Annual Return" to the new total to calculate investment growth. If you've set a "Contribution Growth Rate," the contribution amount increases each year.

At age 18, contributions in this model cease, as the account typically transfers to the child's full control. If the "College Withdrawal Plan" is active, 25% of the balance is withdrawn at this point.

From age 18 until the specified "Withdrawal Age," the calculator continues to apply the annual investment return to the balance, showing pure compounding growth without any new contributions. The final result is a projection of the account's value at retirement.

The projection is built year by year. Here are the core formulas used in the calculation.

Effective Annual Contribution

The contribution for any given year is limited by multiple factors.

effective contribution = min(annual contribution input, child's earned income, IRA limit for 2026)

Where the IRA limit for 2026 is $7,000.

Year-by-Year Growth (Before Age 18)

For each year from the child's current age up to age 18, the balance is calculated.

contribution this year = effective contribution x (1 + contribution growth rate) ^ (years since start)

investment growth = previous year balance x expected annual return

ending balance = previous year balance + contribution this year + investment growth

College Withdrawal at Age 18

If enabled, a one-time withdrawal is processed at age 18.

college withdrawal amount = balance at age 18 x 0.25

balance after withdrawal = balance at age 18 - college withdrawal amount

Year-by-Year Growth (After Age 18)

From age 18 to the final withdrawal age, no further contributions are added in this model.

investment growth = previous year balance x expected annual return

ending balance = previous year balance + investment growth

A custodial IRA is a retirement account opened by an adult (the custodian) for a minor who has earned income. The account is legally owned by the minor, but the custodian manages it until the child reaches the age of majority (typically 18 or 21, depending on state law). At that point, the custodian must turn control of the account over to the child.

The key features are:

• Custodian Control: The adult manages all account activity, including contributions and investment decisions.
• Minor's Earned Income: The minor must have legitimate earned income. This is a strict IRS requirement.
• Contribution Limits: Contributions are limited to the lesser of the child's earned income for the year or the annual IRA limit ($7,000 in 2026).
• Irrevocable Gift: Any money contributed to the account is an irrevocable gift to the minor. The custodian cannot withdraw it for their own use.
• Transfer of Ownership: Once the minor reaches the age of majority, they gain full legal control over the account and all its assets.

These accounts are powerful because they allow decades of tax-advantaged growth to begin in childhood, turning a small investment into a potentially massive sum by retirement.

For nearly every minor, a Custodial Roth IRA is the superior choice over a Traditional IRA. The decision hinges on the child's current tax rate versus their expected future tax rate.

A Custodial Roth IRA is funded with after-tax money. Since most minors earn too little to owe federal income tax, their tax rate is effectively 0%. This means they contribute money that is essentially untaxed, let it grow for 50+ years, and then all qualified withdrawals in retirement are completely tax-free. They get all the benefits with no tax downside.

A Custodial Traditional IRA is funded with pre-tax money, meaning contributions might be tax-deductible. However, a tax deduction is worthless if the child owes no taxes anyway. All withdrawals from a Traditional IRA in retirement are taxed as ordinary income. This means choosing a Traditional IRA for a minor is often a missed opportunity to secure tax-free growth.

The choice is clear: by using a Roth, you lock in a 0% tax rate on the contributions and ensure the entire nest egg, including decades of growth, can be accessed tax-free in retirement. Explore our full guide on Roth IRA vs. Traditional IRA for more details.

This is the most common point of confusion and the most important rule to follow. The IRS defines earned income as money received from work. It does not include investment income, gifts, or an allowance.

Examples of legitimate earned income for a minor include:

• Wages from a part-time job (e.g., at a grocery store or restaurant), documented with a W-2 form.
• Self-employment income from services like babysitting, mowing lawns, tutoring, or dog walking.
• Pay for legitimate work performed for a family business. The pay must be reasonable for the work performed.

Documentation is crucial. For self-employment income, you should keep detailed records: a log of jobs, dates, hours worked, services provided, and payment received. For work at a family business, issue formal paychecks and a W-2. This documentation serves as proof to the IRS that the contributions were valid. Without earned income, contributions to an IRA are considered excess contributions and are subject to penalties.

• Growth Potential Score: This score, from 1 to 99, reflects how well-positioned the plan is. It's based on the child's age (more time is better) and the contribution level relative to the maximum allowed. A high score indicates an excellent head start.
• Total Contributions: This is the total dollar amount invested into the account from the start age until age 18.
• Balance at Age 18: This is the projected value of the account when the child takes control. It's a powerful milestone showing the results of early savings.
• Balance at Age [Withdrawal Age]: The final projected nest egg at retirement. This number demonstrates the long-term power of compounding.
• Growth Multiplier: This shows how many times the total contributions have multiplied. A 10x multiplier means every $1 contributed is projected to become $10 by retirement.
• Growth Projection Chart: This visualizes the account's growth over time. The curve's steepness in later years illustrates exponential growth. The reference line at age 18 marks the transfer of control.

If you want to maximize the potential of a custodial IRA, consider these strategies:

• Start as Early as Possible: Time is the most critical ingredient. Even a few extra years of compounding can add tens of thousands of dollars to the final balance.
• Maximize Annual Contributions: Contribute as much as the child's earned income allows, up to the $7,000 annual limit (for 2026).
• Encourage Earning: Help your child find safe and legitimate ways to earn income. This not only teaches a valuable work ethic but also increases their IRA contribution limit.
• Choose a Roth IRA: Opt for a Roth account to ensure all future growth and withdrawals are tax-free, which is a massive advantage for a young person.
• Avoid Early Withdrawals: While funds can be used for college, try to preserve the retirement savings if other options exist. The long-term cost of that withdrawal, in terms of lost growth, is substantial.
• Invest for Growth: With a multi-decade time horizon, the account can typically be invested in a growth-oriented, diversified portfolio.

1. Contributing More Than Earned Income: This is the most critical mistake. Contributions are strictly limited to the child's earned income for the year (or the IRA limit).
2. Poor Record-Keeping: Failing to document the child's self-employment income can lead to problems with the IRS if ever audited. Keep meticulous logs.
3. Choosing a Traditional IRA: Forfeiting the tax-free growth of a Roth IRA is a significant missed opportunity for a minor in a low or zero tax bracket.
4. Forgetting the Account Transfers at 18: The money belongs to the child. Once they reach the age of majority, you must transfer control.
5. Confusing it with a 529 Plan: A 529 is primarily for education savings with different tax benefits and rules. An IRA is primarily for retirement. See our guide to retirement planning for beginners.