Are you wondering how to open a Roth IRA, but not sure where to start? Everyone knows you should save for retirement and open a Roth IRA account, but so few of us actually do. The reason…perhaps it’s too difficult or you lack the information. Or perhaps it’s too time consuming or too costly. Whatever the reason for putting off the important task of setting a little aside now—to secure your financial future, it’s actually much easier than you think. Knowing how to open a Roth IRA account is one of the best things you can teach to others — and can be completed in just five simple steps.
First, consider your 2013 IRA contribution limits. The limits for 2013 & 2014 are between $5,500- $6,500 and can be contributed between January 2nd and the April 15th tax deadline of the following year. Be advised that contribution limits can also change from year to year, so it’s important to always stay current.
The second step is to make sure this is the best investment for you. Hint: if you don’t own any other investments…it probably is. Your financial planner can help with this. The third is to determine your eligibility. Some people are not. Fourth, select a provider and start to fund your Roth IRA. Finally, select the investment type you want for your Roth IRA.
Most people are eligible to open this type of investment. There are, however, limits on the amount of income one can earn in order to contribute to a Roth IRA. The income limits for 2013 range between $112,000 for individuals filing Head of household, Single, or Married Filing Separately and $188,000 for those filing Jointly. These limits can change from year to year, so it’s important to speak with a professional at least once each year. 2014 limits are slightly higher.
How to actually open an account is relatively simple. There are any number of providers that can help you with opening a Roth IRA and provide the proper information. Brokerage firms, mutual fund companies, banks, and even insurance companies can help. Just make sure when comparing providers to inquire about fees charged and if they have minimum investment requirements.
Once you’ve decided a Roth IRA is right for you, have confirmed you’re eligible, and selected a provider—the only step left to take is to select the type of investment you want for your account. This may be determined based on the amount you plan to invest, your age, and risk tolerance. A general rule is: the younger you are, the more risk you should take because the greater the reward and your money has longer to recover if the market loses. If you’re closer to retirement age, you’ll probably want to be more conservative.
It’s always important to weigh all your options, get all the facts, and only then determine the investment that’s right for you. By speaking with a professional, you’ll find out how to open a Roth IRA account the easy way, get the information you need and discover the many benefits that come from saving for your future.