How to Open a Roth IRA

2. Decide Where to Open Your Roth IRA Account

Almost all investment companies offer Roth IRA accounts. If you have an existing traditional IRA, the same company can probably open a Roth IRA for you.

Ask these questions as you decide where to open the account:

  • Is there a fee to open or maintain it?
  • Does the company provide customer service online or by telephone?
  • Does the company offer the types of investments you’re looking for, whether that means exchange-traded funds (ETFs), target-date funds, actively managed funds, or stocks and bonds?
  • How much does it cost to trade? This is especially important if you plan to buy and sell frequently in your account.

The financial institution you open the account with is called a custodian because it takes custody of your money.

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View important information about our fees and commissions

View important information about our fees and commissions

3. Standard online $0 commission does not apply to over-the-counter (OTC) equities, transaction-fee mutual funds, futures, fixed-income investments, or trades placed directly on a foreign exchange or in the Canadian market. Options trades will be subject to the standard $0.65 per-contract fee. Service charges apply for trades placed through a broker ($25) or by automated phone ($5). Exchange process, ADR, and Stock Borrow fees still apply. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling 800-435-4000. Please read the prospectus carefully before investing.

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6. Choose mutual funds with strong returns

When you’re choosing your mutual funds, look for funds with a long track record—10 years or more—of strong returns that consistently outperform the S&P 500. They’re out there! You’ll also want to spread your investments evenly across these four types of funds:

  • Growth and Income: These funds create a stable foundation for your portfolio by investing in big American companies that have been around for decades. They also pay dividends. (Dividends are payments companies make to their stockholders to share their profits.) You might find these funds listed under large-cap or blue chip funds.  
  • Growth: These funds are made up of medium or large U.S. companies that are up and coming. Sometimes called mid-cap or equity funds, they’re more likely to ebb and flow with the economy.  
  • Aggressive Growth: Meet the wild child of your portfolio. When these funds are up, they’re really up, and when they’re down, they’re really down. Aggressive growth funds normally invest in smaller companies that have tons of potential.  
  • International: Investing in international funds gives you a chance to invest in big non-U.S. companies you already know and love—like Nestlé, which is based in Switzerland. International funds spread your risk beyond U.S. soil. Just don’t confuse them with global funds, which bundle U.S. and foreign stocks together.

1. Decide how you want to invest

Once you’ve confirmed you’re eligible for a Roth IRA, you’ll need to consider what investing strategy you’ll want to take. Do you want to be a hands-on investor, choosing your investments and managing your portfolio directly? Or would you rather take a hands-off approach and let the professionals do the work for you?

If you’re new to investing or not too keen on research, a robo-advisor can be a smart move. These are online, technology-based solutions that build portfolios based on your risk tolerance, goals, and other data. They come with several perks, like automatic portfolio rebalancing and lower fees.

“​​ Robo-advisor funds are a great way for beginner Roth IRA investors to get access to advisor-managed funds at a low cost,” says Adam Bergman, founder and CEO of IRA Financial Group

If you’re interested in a more active approach, a brokerage might be your best choice. With a brokerage, you can build and manage your entire portfolio yourself, usually using an online dashboard or app. It requires more research and investing know-how than other options, and in some cases, may come with higher fees, too. The benefit is there are often more investments to choose from, plus access to real-life investing professionals if needed.

How Much Money Do I Need to Open a Roth IRA?

The minimum amount to open a Roth IRA varies depending on the financial institution. But many, particularly online brokers, don’t require a minimum amount of money to open an account.

1. Find out if youre eligible and ready

First things first. Before you can open a Roth IRA, you have to make sure you meet the income limits to contribute to a Roth IRA.

In 2022, as long as your adjusted gross income is less than $129,000 for single filers and $204,000 for married couples filing jointly, you can contribute the maximum amount to a Roth IRA.1

Remember when we said your Roth IRA has a specific place in your wealth-building plan? Here’s the deal: Eligibility for an IRA isn’t all you should keep in mind. You also need to make sure saving for retirement fits into your budget. That means you’ll need to be halfway through the Baby Steps. Baby Step 1 is saving a $1,000 starter emergency fund. Baby Step 2 is getting out of debt (everything except your house) using the debt snowball method. Baby Step 3 is saving three to six months of expenses for a fully funded emergency fund.

And then you get to Baby Step 4—investing 15% of your household income for retirement. When you’re trying to figure out where to invest for retirement first, remember: Match beats Roth beats Traditional. This means you should invest in your 401(k) up to your match (hey, it’s free money!), then max out your Roth IRA. If you haven’t reached 15% at that point, go back and invest in your 401(k). And if you have a Roth 401(k) at work, great! You can invest your entire 15% there.

Working through the Baby Steps—and getting out of debt—is the quickest right way to build wealth. So if you haven’t paid off all your debt or saved up an emergency fund, stop investing for now. No exceptions!

There’s actually a special group of people called Baby Steps Millionaires who followed these exact steps to build a net worth of a million dollars or more. Want to learn even more about how they built their wealth? Dave Ramsey’s new book, Baby Steps Millionaires, will show you the proven path that millions of Americans have taken to get out of debt and build wealth—and how you can too!

Roth IRA FAQs

Getting started is easy

Choose how you’d like to invest Merrill Edge Self‑Directed A self-directed investing platform that streamlines investing, giving you access to research and insights, and flexible tools—all with low, flat-rate pricing.Footnote  2 Can anyone open a Roth IRA? Only people below a certain income level can open and contribute to a Roth IRA. This is different from traditional IRAs, where anyone can contribute regardless of how much money they earn. Given the income limits that come with Roth IRAs, high-earners may not be eligible to open or contribute to a Roth IRA. (There is a loophole to this, however, for high-earners to make contributions indirectly through a backdoor Roth IRA.) Here are the specific income thresholds for 2021:Married filing jointly or qualifying widow(er): Not eligible if your modified adjusted gross income is $208,000 or moreSingle, head of household or married filing separately (and you didn't live with your spouse at any time during the year): Not eligible if your modified adjusted gross income is $140,000 or moreMarried filing separately (if you lived with your spouse at any time during the year): Not eligible if your modified adjusted gross income is $10,000 or more Why open a TD Ameritrade Roth IRA? Breadth of Investment Choices – Including commission-free ETFs, no-transaction-fee mutual funds1, fixed income products, and much more. Empowering Education – We offer exclusive videos, useful tools, and webcasts to help you create a personalized retirement plan. Smart Tools – Plan and evaluate your retirement strategy with helpful tools like the IRA Selection Tool and Retirement Calculator. Fair and Objective Research – Take control with objective third-party research provided by Morningstar Investment Management, CFRA (formerly S&P Capital IQ), and Market Edge How We Chose the Best Roth IRA Accounts The best Roth IRA accounts offer a broad selection of investment options with minimal fees. Beyond their investment options, the top Roth IRA accounts are also easy to open online and from the comfort of your home. Although a lot of thought and research went into our ranking, here are the main factors we looked for in the best Roth IRA accounts this year. Investment Options Opening a Roth IRA account can help you save on taxes later in life, but you’ll get the best results if you have a broad selection of investments to choose from. We looked for providers that offer many investment options ranging from index funds to ETFs. The more options available from each provider, the higher they scored in our ranking. Low Trading Fees We also looked for Roth IRA accounts with low fees, both in terms of ongoing account management fees and individual trading fees. The Roth IRA accounts on our list tend to come with some of the lowest fees available today. Many also offer a range of fee-free investments to choose from. Investing Help Finally, we gave precedence to Roth IRA providers that offer hands-on investing help. Some of the accounts on our list will even choose all your underlying investments for you. Many also offer investor education and online tools that can help you learn how to invest for optimal results.  3. Provide paperwork After you’ve chosen a provider, it’s time to actually set up and open your account. This typically requires a little paperwork, but many times, it can be done online. You can also open your account in person with a broker or banker. The exact paperwork you’ll need will vary by provider and choice of funding, but here’s a quick glimpse of what you’ll typically be asked for when setting up your account:A form of government-issued ID (driver’s license, passport, etc.)Personal information, including your name, phone number, address, date of birth, and Social Security numberYour preferred contribution methodInformation regarding your rollover account (if you want to fund the account with money from a different IRA, 401(k), or another retirement account)Banking information (if you want to fund the account with electronic transfer)  You’ll also be asked to provide information on your beneficiaries, or the people who will inherit your IRA if you die. “The IRA beneficiary form will require the IRA owner to indicate a ‘primary’ and ‘contingent’ beneficiary to their IRA in the case of death,” Bergman says. “The ‘primary’ beneficiary is the first party or parties that will receive the IRA upon the IRA owner’s death, whereas a ‘contingent’ beneficiary or beneficiaries would only receive the IRA assets if all the primary beneficiaries are no longer alive.” Account opening and funding questions Account opening and funding questions What if I have accounts elsewhere? Consolidating all your accounts at Schwab may help you better manage your finances. We can help you every step of the way in bringing your assets over, in a tax-efficient manner. Click here to learn more. What do I need to open a Roth IRA account? Social security number(s). Driver’s license. Employer’s name and address (if applicable). Statement information for any assets or cash you’d like to transfer. Beneficiary information. How do I open a Roth IRA account? The easiest way to open Schwab IRA account is online. You can also get help opening an account by calling us at 866-855-5635 or visiting one of 300 local branches. The online account application process only takes about 10 minutes. Key steps include: Choosing the type of IRA account. Providing your personal, employment, and financial information. Selecting specific account features. Creating login credentials and providing contact information for your account. Verifying your identity. Indicating how you’ll fund the account. How do I fund my account? There are multiple ways to fund your new Schwab account: Electronic funds transfer (EFT) with Schwab MoneyLink® to transfer funds or assets from an external account. You may also continually fund your account by setting up auto deposit to transfer funds from your checking account. Wire transfer request from another financial institution. Check deposit by mail or in person at your local Schwab branch. Full funding instructions and access to online fund transfer tools will be provided after your account is opened.  TagsStocks and Tradingaddress and onlyLine of CreditWe Offer violation of lawbankservicescreditinsurancesavingsplanningoverviewfidelity

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