What is the Minimum Amount Needed to Contribute to a Traditional IRA?
Traditional IRAs are tax shelters that allow funds to grow tax-deferred until retirement and sometimes may be tax deductible. Minimum contribution amounts depend on the type of investment you plan to use in your IRA.
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Mutual Funds
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Mutual funds provide diversification for small amounts of money. Mutual funds sometimes allow contribution amounts as low as $250 or $500. If you promise to make automatic contributions from your bank account on a monthly basis, a few companies allow you to invest as little as $50 per month.
Stocks
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Discount brokers open IRAs for stock purchases with little money. Some discount stock brokers online waive minimums for IRA accounts. Most, however, require between $1,000 and $25,000 to open an account.
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Banks
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CDs and money market IRAs are available through banks. Many banks allow you to open an IRA for as little as $100. These generally are money market and low-paying CD accounts.
Fees
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Investment fees eat into returns. Fees can affect your returns if you're investing little money. Mutual funds may charge sales fees, stocks require a commission to buy and sell, and banks may have custodial fees. Analyze how fees will affect any investment gains before opening an IRA.
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References
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