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.
You can start saving and investing for retirement through a Roth IRA now by following these steps:
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.
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 advisor or a robo-advisor. Advisory services can recommend a personalized investment mix and then manage your portfolio.
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.
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.
Roth IRAs offer many perks. Here are some key Roth IRA benefits:
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:
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.
Most Roth IRA providers don’t require account opening minimums.
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.
Adults can open a Roth IRA on their own. Minors will need an adult to open and manage the account on their behalf.
Roth IRA growth depends on variables like your contribution amounts and the performance of your investments.
The best Roth IRA investments may include a mix of index funds, dividend stocks, bond funds and other long-term investments.
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