How to Open Up a Roth IRA Vanguard Account
Vanguard is the world's largest no-load (no sales commissions paid by investors) mutual fund company. It specializes in index funds and offers two basic IRAs (individual retirement accounts)---a traditional IRA and the Roth IRA. Roth IRAs are named for the late Sen. William Roth of Delaware, the chief legislative architect of the retirement plan. Roth IRAs differ from traditional IRAs in that contributions to the plan are not tax deductible, but there are no taxes upon withdrawal and no penalties for early withdrawals. Roth IRAs are limited, however, to single people making $95,000 or less and couples making a maximum of $150,000.
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Things You'll Need
- Personal information
- Bank routing number
- Existing IRA information
- Credit card number
Instructions
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Research the differences between traditional and Roth IRAs before committing to the Roth alternative. Roth IRAs offer better long-term return prospects, assuming you choose the same fund options with each choice, but there are income restrictions. Single tax-filers must make no more than $95,000 annually; married couples are limited to a combined maximum yearly income of $150,000. If you make more than those amounts, you cannot contribute to your account for that year.
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Visit Vanguard online. Click on "Go to the Personal Investors Site." Choose "Open new account." Click on "Open an account" in the upper right-hand corner. Follow the remaining prompts (you'll elect to open a retirement account and a Roth IRA, then complete your personal information section).
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Choose among the IRA options offered to you. For example, you can elect to open a new Vanguard Roth IRA, convert your traditional IRA account to a Vanguard Roth IRA, move assets from an employer-sponsored plan or choose another option. You can complete your transaction online or print paper forms and complete them by hand (you'll want to print the forms out and mail them to Vanguard if you're paying by check).
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Select "Roth IRA Conversion Kit." This will convert your existing traditional IRA to a Vanguard Roth IRA.
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Choose "Open a new account" and then log on to your account when prompted. Select "At Vanguard" when asked about the location of the funds you're converting. In the "Account" section, select "Retirement" and "Roth IRA." Provide the required account and beneficiary information. Complete the opening of your new Roth IRA, then select "Continue" to transfer your traditional IRA.
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Choose the fund in your traditional IRA where your assets reside. (Note: If you hold multiple funds in your traditional IRA, you'll initially be able to convert only one, but you can move the rest of the assets once the Roth IRA is established.) Verify that you're converting your account to the correct fund. Review tax information and select the amount you want to convert. Before clicking "Submit," review all information to make sure it's correct.
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Tips & Warnings
Vanguard waives its annual $20 service fee for IRAs if you sign up for its e-service package, which includes paperless statements.
The maximum annual contribution to any type of IRA is $5,000 for 2010 ($6,000 for people 50 years and older).
You'll need your bank routing number to complete the Roth IRA account, whether it's a new account or a conversion.
If you print out and mail your forms, you'll receive a letter or e-mail containing an account number so that you can access your account online.
References
Resources
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