How to Set Up a Roth IRA Account

A Roth IRA is a retirement savings account. Money that you deposit in a Roth IRA may be invested in mutual funds, government bonds, stocks and other financial assets. With a Roth IRA, your contributions are not deductible at tax time, but when you retire, the money that you withdraw is tax-free. To set up your Roth IRA, select an IRA provider and begin making contributions.

Things You'll Need

• Roth IRA application

Instructions

1. Go to the Internal Revenue Service website (IRS.gov) and read Publication 590 to get updated income guidelines on Roth IRAs (see Resources). Determine if you are eligible to set up and contribute to this account. For instance, if you are single and your modified adjusted gross income is over $120,000, you cannot contribute to a Roth IRA. The IRS also sets limits on how much you can contribute each year. You must have taxable income to set up a Roth IRA.

2. Choose an IRA provider. Brokerage firms, banks, mutual fund companies and even insurance companies can all offer Roth IRAs. A few examples of Roth IRA providers include Fidelity Investments, Zecco, T. Rowe Price and Vanguard. Get information from a variety of providers and compare plans to find one that suits you. Some companies may have a minimum initial investment, fees, minimum required contributions and varying investment options. If you are unsure which plan is right for you, contact a financial adviser to discuss your options.

3. Request an application from your selected Roth IRA provider and fill it out. Some companies may offer an online application. Read the fine print before submitting your application, to ensure that there are no hidden fees or other surprises. Designate your beneficiary on the application. Some applications may automatically designate a spouse as the beneficiary upon your death. You may wish to change this, or add a contingent beneficiary.

4. Transfer money to your new Roth IRA account online or write the company a check to begin investing. Stay within the IRS guidelines for contributions.

References

• Fairmark.com: How to Start a Roth IRA
• Get Rich Slowly: How to Start a Roth IRA (and Where to Do It)

Resources

• IRS: Roth IRAs
• IRS: Publication 590: Individual Retirement Accounts (IRAs)