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Investing Basics

March 2015 - Guardian IRA

Does your child have earned income from yard work, child care or some other source? If so, you could set up a Guardian IRA for him or her through Credit Union Investment Services (CUIS).

A Guardian IRA is an IRA held in the name of a legal guardian, such as a parent, on behalf of a minor. The regular IRA rules for eligibility, contributions and distributions apply. While your child is a minor, you will control the investments. Once your child reaches age 18, he or she will sign paperwork to take control of the account and investments.

The minimum investment to open a CUIS account is just $250. Your child can contribute up to $5,500 to a Guardian IRA for 2014 and 2015 (or up to the amount he or she earned for the year, if less than $5,500). If your child does not want to contribute his or her earnings, you can make a contribution to the account. It doesn’t matter who contributes to the Guardian IRA, as long as the contribution doesn’t exceed the child’s earnings for the year.

You and your child can choose a Roth or a traditional IRA. Generally, the Roth IRA will be the better choice, but a CUIS Investment Representative can explain the difference and help you decide. The Investment Representative will also discuss your child's goals and will recommend a low-cost, well-diversified mutual fund. If you prefer to choose your own investments, you may do so; however, the minimum required investment may be more than $250.

CUIS charges a low annual fee of ¼ of 1%. If you invest $250 on your child’s behalf, the CUIS fee would be about $0.63 in the first year. The mutual funds recommended by CUIS Investment Representatives also have very low expenses, ranging from 0.09% to 0.18%, for a fee between $0.23 and $0.45 on $250. For about $1 in the first year, you can teach your child about investing and help him or her start saving for retirement.

Why wait? April 15th is the last day to make IRA contributions for 2014. Call your local branch and make an appointment to meet with a CUIS Investment Representative today.

Investment advisory services offered to North Carolina residents through Credit Union Investment Services. Securities offered through SECU Brokerage Services. Member FINRA, SIPC. Securities products are not credit union deposits. They are not obligations of or guaranteed by a credit union or its affiliates. They are not insured by the NCUA or any federal government agency. Securities products involve investment risks, including possible loss of principal. Investment representatives are also credit union employees, who may accept deposits.

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*Quoted rates, dividends, annual percentage yields (APY) and rates (APR) are subject to change daily at the discretion of the Board of Directors.