How to Open a Roth IRA Account

A Roth IRA account is an individual retirement account that's an alternative to a traditional IRA. Unlike a traditional IRA, the funds grow in the account tax-free, and they can be withdrawn at any time penalty-free, but usually under special circumstances.

Difficulty: Moderately Easy

Instructions

1. Determine your eligibility. You must be an employee who makes an annual salary of less than $101 thousand if you're single, or less than $169 thousand if you're married filing jointly.

2. Research where you want to house your funds, whether it's the traditional brick-and-mortar bank, an online bank, a mutual fund company or a brokerage firm. Study the Roth IRA investment options, such as CDs, mutual funds, stocks, bonds or money market accounts. Compare a few banks online, and check for minimum deposit requirements, interest rates, fees and fund performance to see which company makes a good fit.

3. Visit the branch or the website of the bank that you choose. Learn more information or ask questions, if necessary. Apply for the Roth IRA account in-person or online. You must provide personal and employment information, choose your investment strategy and designate a beneficiary.

4. Make a deposit in-person, by mail or online. The minimum deposit requirements for a Roth IRA can range from $100 to $3 thousand, depending on the bank, mutual fund or brokerage firm. For tax purposes, remember to check the annual contribution limits to avoid any penalties and to ensure growth of your Roth IRA.

Tips & Warnings

• Certain rules apply if you need to make early withdrawals from your Roth IRA. You must hold the account for 5 years, and the money must be used for higher education expenses, a first-time home purchase, major medical expenses or for disability. However, if you wait until you turn 59 1/2 years old, you can withdraw the money tax-free without such restrictions.