How to open an IRA—3 steps to get you started
Updated: November 07, 2024
An IRA, an individual retirement account, can help you prepare for retirement with the added benefit of tax-deferred growth. You can make regular contributions to it to pave the way to a comfortable retirement — and it can complement Social Security income.
If you are ready to start preparing for retirement, start here and we'll walk you through how to open an IRA.
How to open an IRA?
Opening an IRA depends largely on the type of account you are opening, but here's a quick rundown of the basic steps:
Step 1: Choose an online broker or a robo-advisor
Step 2: Open an account
Step 3: Add funds to your account
Take a deeper look at what each of these steps entails, including tips for determining how you want to manage your IRA and which broker could be best for your needs.
Step 1: Choose an online broker or a robo-advisor
When you open an IRA, you have a choice of an online broker or robo-advisor. There is a major difference between the two.
A robo-advisor is great for beginners and passive investors who want a more hands-off approach to investing. It’s a system that uses a particular algorithm to track the market and make trades based on performance. Just beware of management and service fees that can cut into your earnings.
If you prefer to manage investments yourself, an online broker can help. All you have to do is open an IRA account and then you can begin buying and selling investments independently. There are typically several types of investments available, allowing you to trade everything from stocks and bonds to exchange-traded funds (ETFs) and mutual funds.
You may have access to help from a financial advisor, but you are responsible for managing your investments yourself. Be sure to review associated account and trading fees, as well as any investment minimums that may apply.
Robinhood—our choice of broker for an IRA account.
Can it get much better than zero commission fees and $0 minimum investments? If you're looking to open an IRA, yes, it can get even better. Learn more in our expert review of Robinhood.
Step 2: Open an account
Once you decide between a robo-advisor versus online broker, you are ready to open a new account. You will need to decide on the type of IRA account (below we explore them in detail), then choose a financial institution.
Most financial institutions will allow you to open an account online. Select the IRA account you want and complete the form with your personal information.
Step 3: Add funds to your account
After you open an account, you’ll need to fund it. Typically, you have a few options on how to fund your IRA account. You can transfer money from your bank account, or you can transfer existing IRA assets.
You may also roll over an existing IRA. If you have funds in an existing IRA, 401(k) plan or 403(b) plan, you can roll over your IRA to a new account. Simply ask your IRA provider on the next steps. They can contact your former employer’s plan administrator to release payment to your new IRA provider.
Note: When your funds are released, you must reinvest them in a new IRA to avoid tax penalties.
You can invest whatever you like, as long as it is within the requirements for account minimums. Just be sure to remember tax considerations when planning your investment. The IRA has a maximum 2024 annual contribution of $7,000 for those 49 years of age and younger, or $8,000 for those 50 and older1.
Before you invest, consider what you can reasonably afford, and try to commit to automatic transfers as you can – anything is better than nothing to save for your future.
What you need to open an IRA
When opening an IRA, there are certain materials you will need to provide.
- Personal information. Your provider will ask for your full name to open your account. You’ll also need to furnish proof of identity, which can include your driver’s license number, Social Security Number and date of birth.
- Contact information. A full address and phone number will need to be kept on file with your provider.
- Bank account information. You will need to provide your account and routing number for your bank account so you can make future transfers. You'll likely also need the contact information for your bank.
Requirements may vary from institution to institution, so be sure to check the exact requirements for your IRA provider.
Information Needed to Open an IRA
| Types of information | Details |
|---|---|
| Personal information |
● Full name
● Date of birth ● Address ● Phone number |
| Financial information |
● Bank routing number
● Bank account number ● Bank address ● Bank contact information |
| Other details |
● Beneficiary information
● Employer details |
Where to open an IRA?
Part of knowing how to open an IRA is knowing where to open one. Before you choose a provider, however, be sure to research the company. Look for important details like investment availability and minimums, as well as available customer support options. That will help you determine how to invest in an IRA on your terms.
Types of IRAs
The IRS recognizes six main types of IRA accounts available2.
- Traditional IRA. A traditional IRA allows you to contribute pre-tax dollars up to the contribution limit that are not taxed until withdrawal. Funds are eligible for penalty-free withdrawals after the age of 59.5 unless you meet special requirements. Required minimum distributions (RMDs) are required at the age of 73.
- Roth IRA3. When comparing a Roth IRA vs traditional IRA, both have eligibility requirements based on income and where you have an existing retirement account at work. However, Roth IRA investing rules allow you to invest after-tax dollars up to the contribution limit. You typically cannot withdraw funds from a Roth IRA for five years but initial contributions can be accessed without tax or penalty. Roth IRAs do not require RMD withdrawals, and after the age of 59.5, all withdrawals are free of tax and penalties.
- Payroll Deduction IRA. A Payroll Deduction IRA4 is an IRA for employees from their employer. After an IRA is established, employees can make regular contributions directly from their paychecks for a fuss-free way to save.
- SEP IRA5. A simplified employee pension (SEP) IRA allows employers to contribute to their employees’ IRAs, up to a portion of the employee’s salary. Because of this added contribution, the contribution allowances are higher than a traditional IRA.
- SARSEP6. The Salary Reduction Simplified Employee Pension Plan (SARSEP) is a type of SEP IRA that was created before 1997 and includes a salary reduction arrangement.
- Simple IRA7. A simple IRA is for a small business with 100 or fewer employees. Employer contributions are set at 2% or 3% for matching contributions, and employees then have the choice to add their own contributions or not.
- Gold IRA. Along with traditional assets like stocks and bonds, gold IRAs also allow you to diversify your portfolio with gold and other precious metals.
Thor Metals Group—our choice for a gold IRA account.
You can take advantage of the long-term market potential of this precious metal by starting a Precious Metals IRA with help from Thor Metals. Enabling investors to include gold or silver in their portfolio, a Precious Metals IRA can be a secure and stable investment option, enhancing diversification and safeguarding your cash value against economic uncertainties.
Thor Metals offers expert guidance and secure storage of your precious metals assets in partnership with top-tier, IRS-approved depositories. Plus, their investment guides help you to better understand the market and make sound decisions about your investments.
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Lena Muhtadi Borrelli brings over 20 years of experience in the finance industry. She began her career at Morgan Stanley before transitioning over to media. As a finance writer, she has served as an authority for several respected outlets, including Forbes, TIME, Newsweek, Bankrate, Investopedia, Insurance.com, and InvestorPlace. No matter what she is writing, Lena has a unique ability to simplify complex topics, making finance more approachable and relatable to the average reader. When she is not writing or scanning the news for the latest headlines, she is happiest spending time in the Florida sunshine with her husband and two pups.
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