Fidelity Introduces the Roth IRA for Kids, Giving Next Generation a Head Start on Retirement Savings

Custodial Accounts on Behalf of Income-Earning Minors Help Families
Invest for Their Child’s Future

What Difference Can a Roth IRA in Childhood Make? The Answer May
Surprise You

BOSTON–(BUSINESS WIRE)–Fidelity Investments®, the number one provider of IRAs1,
today announced the Fidelity®
Roth IRA for Kids
, helping adults give the children in their lives a
jumpstart on retirement savings. Through this product, an equivalent or
portion of the minor’s qualifying income—lesser of $5,500 (IRS limit) or
yearly earnings – can be set aside. For example, if a minor earns
$1,000, then a maximum of $1,000 can be contributed to the account.

Why set aside money into a Roth IRA?

While retirement may feel far off in the future and even hard to
imagine, placing a little money in an IRA at an early age can make a big
impact down the road and can give a child a head start on retirement
savings. The Fidelity Roth IRA for Kids offers access to a wide array of
investment options with no account minimum or maintenance fees. An adult
custodian such as a parent, grandparent, aunt, uncle or family friend
maintains control of the account until the child reaches the required
age at which time the custodian transfers the account to the individual.

“Saving for retirement is critically important at any age and teaching
savings skills early can have a tremendous impact on behaviors as one
ages. Families that save early have the benefit of time, giving their
children a running start—especially as people live longer and have fewer
sources of lifetime income,” said Ken Hevert, senior vice president of
retirement products, Fidelity Investments.

Why are Roth IRAs particularly well-suited for minors?

  • Time is on their side: Teens have a long timeline to retirement
    for their investments to grow. An early starter who saved the maximum
    Roth IRA contribution each year from age 15 to 70 would have nearly
    doubled the retirement account balance of a diligent worker who saved
    the maximum starting at age 25.2
  • Lower Income, Tax Benefits: Since teenagers’ earnings typically
    fall within the lowest income tax bracket, a Roth’s tax structure is
    particularly advantageous. While they may pay minimal taxes at the
    upfront, the money invested within a Roth IRA will then grow tax-free3.
  • Penalty-Free Withdrawals for College or Buying Their First Home: If
    necessary, the child can withdraw the funds penalty-free for a
    first-time home purchase (up to $10,000) or qualified higher
    educational expenses—two of the biggest savings goals in a young
    person’s life.

Three Ways a Roth IRA Can Help You Raise a Money Savvy Kid

Setting up a Roth IRA for your child, grandchild or loved one also can
open the door to important family financial conversations. Those money
talks can give your child the financial tools needed to be better
prepared for adulthood. “Teaching your child the importance of saving
for the future and introducing the concept of investing at an early age
can set them up for a more informed and successful investment approach
for the many savings goals they will have, including retirement,” added
Hevert. For example, just learning about the differences between mutual
funds, ETFs, and individual stocks can help create a generation of
retirement investors who are more confident in their knowledge and
decisions.

Here are three tips for how you can use your child’s Roth IRA as a
financial learning opportunity:

  1. Engrain good savings habits early: Some families may want to
    consider asking their child to contribute a portion of earned income
    into the Roth IRA directly or offering to match each dollar the child
    puts in. Saving some of their own hard-earned money can help children
    get into the habit of putting a portion of income towards long-term
    goals.
  2. Illustrate the Power of Having Time on Your Side: Walk through “Turbocharge
    your child’s retirement with a Roth IRA for Kids
    or visit
    fidelity.com/rothforkids together to show your child the
    advantage of starting to save early and how much more would need to be
    saved down the line to catch up for lost time.
  3. Test Drive Investing: Sit down together as a family, or even with a
    financial professional, to talk through investment strategy and design
    a portfolio for your kid’s Roth IRA. Show your child how to execute a
    trade and track returns over time.

For additional information on Retirement and IRAs, please visit www.fidelity.com/ira.

About Fidelity Investments
Fidelity’s goal is to make
financial expertise broadly accessible and effective in helping people
live the lives they want. With assets under administration of $5.2
trillion, including managed assets of $2.1 trillion as of November 30,
2015, we focus on meeting the unique needs of a diverse set of
customers: helping more than 24 million people invest their own life
savings, nearly 20,000 businesses manage employee benefit programs, as
well as providing nearly 10,000 advisory firms with technology solutions
to invest their own clients’ money. Privately held for nearly 70 years,
Fidelity employs 42,000 associates who are focused on the long-term
success of our customers. For more information about Fidelity
Investments, visit https://www.fidelity.com/about.

Keep in mind that investing involves risk. The value of your investment
will fluctuate over time and may gain or lose money.

Fidelity Investments and Fidelity are registered service marks of FMR
LLC.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900
Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500
Salem Street, Smithfield, RI 02917

National Financial Services LLC, Member NYSE, SIPC
200
Seaport Boulevard, Boston, MA 02110
ER#

748982.1.0

© 2016 FMR LLC. All rights reserved.

1 Cerulli Associates’ The Cerulli Edge®—Retirement Edition,
3Q 2015 based on an industry survey of firms reporting total IRA assets
administered for Q2 2015.

2 Hypothetical calculating pre-tax growth of annual maximum
IRA contributions.

3 A distribution from a Roth IRA is tax-free and penalty-free
provided that the five-year aging requirement has been satisfied and one
of the following conditions is met: age 59 ½, death, disability, or
qualified first time home purchase

Contacts

Fidelity Investments
Kimberly Reingold, 401-292-7328
Kimberly.Reingold@fmr.com
or
Joe
Madden, 617-901-0469
Joseph.Madden@fmr.com
Fidelity
Corporate Communications,
617-563-5800
Follow us on Twitter @FidelityNews