There is no doubt that you have heard about the many benefits of investing in an individual retirement account, especially a Roth IRA. You may have already done some research, giving you an idea of how a Roth IRA works.
If you are wondering how to open a Roth IRA, you may be surprised at how easy it is to open this type of individual retirement account. In just a few minutes, you can be on your way to growing and maintaining a comfortable nest egg.
Make sure that you are also focused on other aspects of capital growth and preservation, such as emergency savings, and a commitment to reducing debt. Nothing can derail your retirement plans faster than an unexpected emergency expense, or a large amount of high-interest debt.
When you have developed and executed a plan for debt reduction, you can then funnel any extra money into a retirement account.
Where And How To Open A Roth IRA
The decision of where to open your Roth IRA is an important one, and many brokerages and firms offer Roth IRAs. There are different strengths and weaknesses with each option, and your decision will depend on your individual objectives.
It is more important to find a good fit and get your IRA started, then to worry about finding the perfect match. ETrade offers low cost Roth IRAs, with different restrictions and fees. It is important to thoroughly research potential brokerages, and find out if they fit your investment criteria.
When figuring out how to open a Roth IRA you should take into consideration any minimum investment amount, or minimum contribution amount. It is important to consider any fees that may be applied to your Roth IRA, as these can eat away at profits, and negate any potential tax savings.
Look for a brokerage that offers automatic contributions to your individual retirement account, and also offer the widest range of investment options and asset classes. Some institutions such as banks and credit unions, severely restrict your options for investing, and you may even be limited to low-yielding CDs in some cases.
And finally, you should always use a reputable provider for your Roth IRA. Online brokerages and self-directed IRAs open through a mutual fund company are excellent low-cost options if you like to make your own investment decisions.
Funding Your Roth IRA
You can fund your Roth IRA in a number of ways. You can convert funds from an employer sponsored retirement account, such as a 401k or 401b. You may have to pay the current years taxes on funds rolled over into a Roth IRA, but the long-term tax benefits usually outweigh any immediate tax penalties.
You can also contribute funds that you have earned while employed, and in certain cases other taxable income, such as taxable alimony. If you are under the age of 50, as of 2011, the maximum amount you can contribute to a Roth IRA is $5,000 annually. As an added incentive for older investors, this amount is increased to $6,000 annually for individuals over 50 years of age.
You can reap enormous retirement benefits by contributing the maximum amount allowed to your Roth IRA account. Since there is no mandatory age for distributions as is seen in a traditional IRA, you can defer withdrawals for as long as you would like.
By learning how to open a Roth IRA you are better positioning yourself for a comfortable retirement, and the piece of mind that this tax-advantaged account can provide.