How Do I Open a Roth IRA?

How do you open a Roth IRA? I can tell you from personal experience, it’s super easy.

The first retirement account I ever opened was a Roth IRA, back in the early 1990s, before I knew much about personal finance. A friend recommended it, so I opened one up and started putting small amounts of money in every month, even as I was working to pay off credit card debt. (Yes, this was waaaayyy back in the day.)

Now that I’m older, I’m so grateful to my young self for opening that Roth. One huge benefit with a Roth IRA is the tax break: All of your money grows tax-free, and when you withdraw your money in retirement, you owe zero taxes. That’s unlike a traditional IRA or traditional 401(k) — you’re going to owe income tax on your withdrawals from those accounts.

(There are other great retirement account types, too. Check out our retirement account guide for more on those.)

Another huge benefit of Roth IRAs is they can act as a sort of backup emergency fund. Ideally, you let your money sit in the Roth and grow until you retire. But if a big life emergency happens, you can always withdraw your contributions without penalty or taxes.

That is not the case for your earnings. Whatever interest or investment returns you earn on your money needs to stay in that account until you are 59½ or older. Otherwise, you’re likely to owe a 10% penalty in addition to income taxes (there are some exceptions to this rule).

That is just a huge hit to your savings. You don’t want that. I don’t want that for you. If you absolutely must take money out of your Roth before retirement, be sure to withdraw solely your contributions.

OK, back to the question at hand. How do you open a Roth IRA? Here’s how:

1. Make sure you’re eligible. There are income limitations. Here’s a handy IRS table on Roth IRA income limits.
2. Open your account at a brokerage. You can open Roth IRAs at many banks, but your best bet is an investment account so you can, you know, invest your money. If you’re not sure which broker is right for you, check out the roundup of the best brokers for IRAs on our sister site, StockBrokers.com. When you set up your account, make sure you pick the “Roth IRA” option.
3. Transfer money to your new Roth IRA. Most brokers let you open an account with $0, so you can start with just, say, $50. (The one caveat is the investment you choose may have a higher minimum; for example, some mutual funds have a $1,000 minimum initial investment). The maximum you can contribute currently is $6,500 per year into your Roth IRA, plus an extra $1,000 if you’re 50 or older. Those contribution limits often increase each year so keep an eye on that if you’re one of those maximal savings types.
4. Pick your investments. Simplest option? Choose a target-date fund. These one-stop shops provide a diversified portfolio that gradually gets more conservative as you approach retirement. Check out our story on how to invest for retirement for more ideas.
5. Go sip that cocktail/mocktail on the beach and rest easy knowing you have taken a huge step in planning for your future. But, one last thing: Set up auto-saving. By transferring a set amount from your checking or savings account to your Roth IRA every month, you are paying yourself first. So. Very. Smart. And it can be a small amount, such as $25. Go do it now.