How to Start a Roth IRA
How do you open a Roth IRA? Follow these steps.
Opening a Roth IRA is the first step toward a secure financial future. Setting aside money today for your future retirement is one of the best financial moves you can make.
The main steps to setting up a Roth IRA are:
- Verify that income is below the Roth IRA income limits
- Determine what your contribution limit is based on your age
- Select your target investments
- Choose a Roth IRA provider and fund your investments
Verify Income Eligibility for Roth IRA
The IRS only allows individuals with incomes below certain levels to utilize a Roth IRA. These income ceilings start in the six figure range.
Additionally the income criteria is determined by your tax filing status. Married individuals that file taxes together get a higher ceiling than a single filer because the IRS is assuming both individuals may have income.
Read more about Roth IRA income eligibility.
Determine Your Roth IRA Contribution Limit
The IRS limits how much money can be contributed to various retirement accounts. Your 401k contributions are usually limited to $17,500.
Roth IRA contributions are no different. For most individuals the contribution limit is $5,500. However, the limit can change based on your age.
Read more about Roth IRA contribution limits.
Select Investments for Roth IRA
Once you verify you are eligible to invest and how much you can contribute you must figure out what investments you are targeting for your Roth IRA.
Knowing what investments you want will help you select a Roth IRA provider that can meet your needs. If you're looking for a specific rare investment option then you need to make sure the provider has options in that option.
Find a Roth IRA Provider
There are numerous options for Roth IRA providers ranging from banks to mutual fund companies, brokerage firms, and insurance companies. When comparing your options, be sure to ask about what each type of provider charges in fees or if they have minimum investment amounts.
Open an Account Now
E*TRADE FINANCIAL is one of the most trusted online brokers on the web. E*TRADE is known to have top notch customer service, low fees, and robust research tools. Unlike some discount brokers, E*TRADE makes phone support readily available so they are a great choice for the novice investor that needs assistance after creating an account. Here's why E*TRADE might make sense for you:
- Open an IRA and Get up to $600
- $7.99 - $9.99 per stock & option trade
- Free Trading Education
Scottrade.com. Scottrade is the most well known discount internet broker and continuously maintains extremely high customer satisfaction numbers. While not the bottom line "cheapest" provider on our list, Scottrade provides the highest quality mix of low prices, free investing research tools, and a track record of reliability.
- $7 stock trades
- Robust free tools
- Highly trusted online broker
TradeKing was ranked #1 in customer service by SmartMoney Magazine. Trades cost a bit more but if you place a premium on ease of use, TradeKing might make the most sense despite slightly higher fees. Why consider opening a Roth IRA with TradeKing?
- Highest customer service ranking by SmartMoney Magazine
- Low, simple per trade pricing
- Industry leading research tools