How to open a Roth IRA

The first question you must ask yourself when considering a Roth IRA:

“Is a Roth IRA an ideal solution for my needs?”

There is no easy answer to that question. You must weigh many factors, including:

  • Anticipated earnings – will you be in higher income tax brackets later in life? A Roth IRA is excellent for those who plan on earning substantial incomes later in life because the money earned/withdrawn from a Roth IRA is non taxable.
  • Eligibility – If, as a single person, you earn more than $105,000 per year, you are ineligible to open a Roth IRA. If, as a married person, you earn more than $167,000 per year, then you are ineligible to open a Roth IRA. (Please check with a licensed agent within your state for current eligibility restrictions).
  • Funds availability – will you need the money sooner rather later? The earliest age you can withdraw on a Roth IRA is 59.5 years of age. If you will need to make withdrawals before that time, you can do so but you will be subject to additional penalties and taxes.
  • Management of funds – depending on the individual, you can choose a Roth IRA that allows you to play a direct role in where the money is invested. Or, if you would rather have a “hands off” approach, you can choose a Roth IRA that is managed entirely by someone else. Which option are you more comfortable with?
  • Roth IRA Providers – there are many options for finding a company to create your Roth IRA, ranging from stock brokers, banks, and insurance companies. You can even work directly with mutual fund companies if you so desire. Each type of provider can offer different types of Roth IRAs, and you will need to do your research to find out how they differ from one another.

After you’ve taken into consideration the above factors, the next step will be to contact a licensed agent within your state. Most agents usually work with multiple provides, so one agent can give you a variety of options for your Roth IRA account. It’s advisable to speak with at least two experienced, knowledgeable agents so you can get a better idea of what possibilities are available to you.

The final step in opening a Roth IRA is to gather the necessary documents and give them to your agent. He or she will provide you with a list of necessary documents in order for you to open a Roth IRA. It’s best if you provide copies and keep your original documents in a safe place.