How to Purchase Roth IRAs
A Roth IRA can be a helpful way to save for retirement. Unlike a tax-deferred traditional IRA, a Roth IRA is funded with after-tax dollars. However, when you begin to make qualified withdrawals, the proceeds are tax-free. You do not purchase a Roth IRA; rather, you establish it and then fund it. Once funds are deposited in the account, you are free to invest them in a variety of securities, such as stocks, bonds, CDs or mutual funds. Here's how to set up a Roth IRA account.
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Things You'll Need
- Phone or Internet access to a brokerage or asset management firm
- Roth IRA forms
- Funds to deposit into the account
Instructions
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Contact a brokerage by phone or over the Internet and request or download the forms necessary to establish a Roth IRA account.
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Complete and sign the forms. After completion, make a copy to retain with your personal financial records.
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Mail or return the forms in person to the asset management company you have selected. Delivering them personally may actually save you time. If there are errors or omissions on your paperwork, you can correct them immediately and set your account up even sooner.
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Deposit funds into the account. You may wish to make a lump sum deposit or establish a schedule of regular monthly deposits. Until you begin purchasing securities, your funds will reside in the cash portion of your account and may earn a small rate of interest.
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When your cash balance has grown sufficiently, you can begin investing your funds in the securities of your choice.
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Tips & Warnings
For additional information on establishing, funding and redeeming Roth IRAs, you may wish to obtain IRS Publication 590. You may download it from the IRS website or obtain a hard copy.
Your choice of investments may dictate your choice of who will manage your Roth. For example, if you prefer to invest in CDs, a bank might be the best choice, as there are no fees associated with setting up a certificate of deposit.
When choosing a brokerage, inquire about sales commissions. Many full-service brokers base their commissions on a fixed percentage of the dollars you invest. They may charge annual account management fees as well. Online brokerages generally charge flat fees regardless of how much you invest in an individual security or how many shares of stock you buy or sell.
