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How to open a Roth IRA

Open a Roth IRA at banks, brokers, credit unions and other financial institutions, but investment options and resources will differ across custodians.

A Roth individual retirement account (IRA) is a type of tax-advantaged retirement savings vehicle that allows you to make tax-free qualified withdrawals at retirement. You can open a Roth IRA online through various banks and brokerage firms and invest your money in virtually the entire securities universe, including stocks, bonds, mutual funds, exchange-traded funds (ETFs) and more.

Here’s how to open and start saving for retirement through one of these valuable investment accounts.

How to start a Roth IRA in 4 steps

You can start saving and investing for retirement through a Roth IRA now by following these steps:

1. Determine your eligibility

To contribute to a Roth IRA, your Modified Adjusted Gross Income (MAGI) can’t exceed certain limits. To contribute the full $7,000 — $8,000 if you’re 50 or older — for tax year 2024, single filers must have a MAGI of $146,000 or less. Married couples filing jointly must have a MAGI of $230,000 or less.

The Internal Revenue Service (IRS) phases out contributions as your MAGI exceeds these limits until you reach a point where you can no longer contribute to a Roth IRA. Single filers with a MAGI over $161,000 and married couples filing jointly with a MAGI over $240,000 can’t contribute at all to a Roth IRA.

2. Choose a provider to open your Roth IRA

You can open your Roth IRA through various banks, brokerage firms, credit unions and other financial institutions. Be sure to compare your options, as different IRA custodians charge different fees and offer different investment options and investing tools.

Hands-off investors might consider opening a Roth IRA with a financial adviser or a robo-advisor. Advisery services can recommend a personalized investment mix and then manage your portfolio.

3. Decide how much to invest

Every year, the IRS sets contribution limits for IRAs. For tax year 2024, the total you can contribute across all your traditional IRAs and Roth IRAs is $7,000 if you’re under age 50 or $8,000 if you’re age 50 or older.

While the amount you can contribute depends on your specific circumstances, leveraging your Roth IRA to its fullest potential could be a wise strategy for retirement planning.

Pro tip
A growing number of brokers are offering IRA contribution matches, which can help you optimize your IRA contributions. For example, Robinhood offers a 3% match on every dollar you contribute to your IRA with a Robinhood Gold subscription, or 1% without.

4. Pick your investments

Many Roth IRA providers allow you to invest in a variety of securities like stocks, bonds, mutual funds and exchange-traded funds (ETFs). Some also offer alternative investments such as cryptocurrency and access to startups.

Consider the types of assets you’d like to invest in before you sign up for an account so you can invest according to your goals.

Best place to open a Roth IRA

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Benefits of a Roth IRA

Roth IRAs offer many perks. Here are some key Roth IRA benefits:

  1. Earnings grow tax-free. The interest and investment earnings in a Roth IRA grow tax-free.
  2. No mandatory withdrawals. Unlike with a traditional IRA, you are not required to make mandatory withdrawals starting at age 73.
  3. Tax-free withdrawals in retirement. Make tax-free withdrawals as long as you’re at least 59.5 years old and at least five years have passed since the tax year you made your first contribution.
  4. Various investment choices. Nearly every asset is legally permissible inside a Roth IRA, except life insurance and collectibles.(1) Invest in everything from stocks and mutual funds to alternative investments. Available investment options depend on what the IRA custodian offers.
  5. Flexible access to contributions. You can withdraw contributions — but not investment earnings — from a Roth IRA any time penalty- and tax-free. This is because contributions to a Roth IRA are made on an after-tax basis, and the IRS can’t tax it twice.

How to open a Roth IRA for a minor

If you’re wondering how old you have to be to open a Roth IRA, there’s no age limit. You can open and manage a custodial Roth IRA for a child age 17 or under as long as they have earned income. As the account custodian, you’d manage the Roth IRA until the child reaches the age of majority, which is 18 to 25, depending on the state.

Here’s how to open a Roth IRA for a child:

  1. Choose a broker that offers custodial IRAs. Not all brokers offer custodial IRAs. Some examples of brokers that offer these account types are Fidelity Investments, Charles Schwab and E-Trade. But be sure to research your options. Some brokers offer wider investment options, lower fees and even bonuses for switching brokerage accounts.
  2. Apply and open an account. To complete your application, you’ll need to provide some personal information about yourself and the minor. Make sure you have Social Security numbers for you and the child, your government-issued ID and proof of income for the child.
  3. Choose your investments. Since you’ll manage the account until the child reaches the age of majority, you’ll need to choose the investments.

Bottom line

A Roth IRA allows you to invest with tax-free growth and withdraw money tax-free at retirement. However, some brokerages may offer Roth IRAs better suited for you than others. Compare IRA providers to find the best Roth IRA for your needs.

Frequently asked questions

How much money do you need to open a Roth IRA?

Most Roth IRA providers don’t require account opening minimums.

How do I open a Roth IRA for a beginner?

Beginners may want to start by researching different Roth IRA providers to see which offer the features that suit them. Watch for any account management fees they may charge, the types of investments you can choose and any digital tools that can help you analyze investments and visualize your retirement plan.

Can I start a Roth IRA on my own?

Adults can open a Roth IRA on their own. Minors will need an adult to open and manage the account on their behalf.

How much will a Roth IRA grow in 10 years?

Roth IRA growth depends on variables like your contribution amounts and the performance of your investments.

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