Don’t wait until you are retirement age to think about opening a Roth IRA. Everyone knows they should save for retirement and in the meantime open a Roth IRA account. Many of us neglect to fully take advantage of these tax-deferred investment vehicles. Whatever the reason for putting off securing your financial future, it’s not as complicated as it may appear. Before you consult with a professional you should be aware that there are different IRA interest rates, rules, tax benefits, and annual contribution limits. Knowing how to open a Roth IRA account is of immense practical value for yourself and your family.
First, consider your 2016 IRA contribution limits. The limits for 2015 & 2016 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 2016 range between $132,000 for individuals filing Head of household, Single, or Married Filing Separately and $194,000 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. 2015 limits are slightly lower.
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.