Direct answer: The annual review for a teen's investment accounts covers four items: (1) 529 plan glide path and enrollment year (confirm allocation is shifting conservative on schedule); (2) Roth IRA contribution total (ensure it does not exceed the year's earned income; top up before April deadline if under the limit); (3) UGMA/UTMA allocation (confirm holdings match the long-term purpose; rebalance if needed); (4) kiddie tax exposure (if UGMA/UTMA unearned income exceeds $2,700 in 2026, excess is taxed at the parent's rate). This review takes under an hour and should happen annually in October-December while there is still time to act before year-end.
Annual Investment Review for Teens: 529, Roth IRA, UGMA/UTMA and Kiddie Tax Checklist
Key Takeaways
- Annual review covers four accounts: 529 (glide path), Roth IRA (contribution limit vs. earned income), UGMA/UTMA (allocation), and a kiddie tax threshold check.
- Roth IRA contributions for the current tax year can be made up to the tax filing deadline (typically April 15 of the following year). Annual review in fall gives time to top up before year-end or plan for a spring contribution.
- 529 enrollment year errors are common and are best caught before the academic year when allocation changes can still be made cleanly.
- Kiddie tax threshold in 2026: $2,700. Unearned income above this in a teen's accounts is taxed at the parent's marginal rate.
- UGMA/UTMA holders approaching the age of majority need a conversation about the account, not just an allocation review.
529 Plan Check
Verify enrollment year
Log into the 529 plan account and find the beneficiary's projected enrollment year. Compare it to the teen's expected college start year. A mismatch (often from a plan opened years earlier with a guess) means the glide path may be ahead of or behind where it should be. Correct the enrollment year through the plan's settings.
Confirm allocation matches the glide
For an age-based portfolio, check the current equity/bond allocation and compare to what the plan publishes as the expected allocation for this enrollment year. If the allocation looks more aggressive than expected (still 80% equity with college one year away), the portfolio may have been manually overridden or the enrollment year is set too far out.
Reference allocation by years to enrollment:
- 5-8 years out: 60%-80% equity
- 3-4 years out: 40%-60% equity
- 1-2 years out: 20%-40% equity, shifting toward money market and bonds
These are typical ranges from major 529 plan age-based portfolios, not investment advice. Actual allocations vary by plan.
Roth IRA Contribution Review
Total contributions vs. earned income
Find total Roth IRA contributions made year-to-date. Compare to the teen's estimated or confirmed earned income. Contributions must not exceed earned income or $7,000 (2026), whichever is less. If contributions are below the earned income and there is remaining capacity, consider whether to top up before April of the following year.
Verify no excess contributions
If the teen's earned income was lower than expected (reduced hours, job ended early), verify contributions do not exceed the actual earned income. An excess contribution of even $1 triggers a 6% annual penalty until corrected. The correction deadline is the tax filing deadline including extensions; acting now avoids the penalty entirely.
UGMA/UTMA Allocation Review
Holdings match the purpose
Confirm the UGMA/UTMA holdings align with the account's intended purpose. If the purpose is long-term retirement wealth building, the allocation should be high equity through broadly diversified index funds. If positions have drifted due to market movement (one stock or sector now a large concentration), consider whether rebalancing is appropriate.
Tax-lot review for capital gains
UGMA/UTMA gains are taxable in the year realized. If the account has positions with large unrealized gains and the teen is approaching age 19 (when kiddie tax rules change) or the parent's marginal rate is high, the timing of any sales matters. This is a tax planning question best addressed with a tax adviser.
Kiddie Tax Threshold Check
Review the year's estimated unearned income from all of the teen's accounts: UGMA/UTMA dividends, capital gain distributions, and interest. In 2026, unearned income above $2,700 is taxed at the parent's marginal rate. If the teen is approaching or has exceeded the threshold, the family should understand the tax liability before filing.
| Unearned Income | Tax Rate |
|---|---|
| $0 to $1,350 | 0% (standard deduction) |
| $1,350 to $2,700 | Teen's own tax rate |
| Above $2,700 | Parent's marginal tax rate |
Frequently Asked Questions
When should the annual review of a teen's investment accounts happen?
The best time for a teen's annual investment review is between October and December. This gives enough time to make Roth IRA contributions before year-end (Roth IRA contributions can actually be made up to the tax filing deadline in April, but reviewing earlier avoids rushing), to verify 529 allocation before the next calendar year, and to review kiddie tax exposure while there is time to manage any UGMA/UTMA distributions. The 529 enrollment year and glide path check is most useful in fall, before academic year planning locks in.
What is the kiddie tax threshold for 2026?
In 2026, the kiddie tax applies to unearned income above $2,700 for dependents under age 19 (or under age 24 for full-time students). The first $1,350 of unearned income is tax-free; the next $1,350 is taxed at the teen's rate; amounts above $2,700 are taxed at the parent's marginal rate. Unearned income includes dividends, capital gains distributions, and interest from investment accounts such as UGMA/UTMA holdings. Kiddie tax thresholds are indexed for inflation and change annually.
Can a Roth IRA contribution be made after year-end for the prior tax year?
Yes. Roth IRA contributions for a given tax year can be made up to the tax filing deadline (typically April 15 of the following year, plus extensions). A contribution made in January, February, or March of 2027 can be designated for tax year 2026, as long as the total contributions for 2026 do not exceed the earned income limit or the $7,000 annual limit. This gives families extra time to true up contributions after the teen's final W-2 confirms total earned income for the year.