How to open a Roth IRA?

PhilippaK

May 13, 2011

This article helps you to find out if you are eligible for a Roth IRA account and if you are, it guides towards the selection of your provider. Finally, you can learn more about the fees associated with opening an account.

The four steps to opening a Roth IRA account

Opening a Roth IRA account involves complying to Roth IRA requirements in the following 4 steps: 1. Verification that your income falls below the imposed income limit
2. The amount of your contribution in accordance with your age
3. Your choice of investments
4. Choose your best Roth IRA provider and start funding your Roth IRA investments

What are the limits of a Roth IRA account?

What is your income level? Obviously, you can only start a Roth IRA account it you fall below its imposed income limit. The limit starts at six figures onwards. A married couple has a higher limit as it is assumed that both adults are earning. How much can you contribute? The average limit of contribution is $5,000. This amount is however, negotiable depending on your age.

What is your choice of investments and a provider?

What is your choice of investment? What you choose to invest in influences your choice of provider as not all providers provide the kinds of investments you are targeting, especially the not-so-common types of investments.
The types of providers
Roth IRA accounts can be opened under the guidance of banks, insurance companies, mutual fund companies and brokerage firms. You can choose your provider based on the following: 1. Availability of your choice of investments
2. Minimum investment accounts if any
3. Fees charged Some popular providers are Zecco, TradeKing and Scottrade.

Roth IRA account fees

Since you have to pay a fee for opening these accounts, what you can do is look for providers with the lowest fees who also have the investment options that you are looking for. The three types of fees These are account maintenance fee, expense ratio on mutual fund investments and stock and ETF trading commissions. If you pay for an account maintenance fee, it means that you are paying for the overhead expenses of the provider. In other words, you pay this figure every month as soon as you open an account. You should agree to this payment condition before you commit to opening an account. This may be reasonable if you are investing in one of those not-so-common types of investments.

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