MORE LIKE THISInvestingRoth and Traditional IRAs
Individual retirement accounts or IRAs are important tools that help you save and invest for retirement. Unlike 401(k)s, which can only be accessed through workplace programs, IRAs are open to virtually anyone. Opening one is easy, and once you've done that, you can take your time funding the account and making investment selections. Here's how to get started in four steps.
» MORE: Looking specifically to open a Roth IRA? Read our 5-step guide.
How to open an IRA
1. Decide between an online broker or a robo-advisor
What sort of investor are you — hands-on or hands-off? Your answer will help determine whether you should set up an IRA with an online broker or a robo-advisor.
If you want to choose and manage your investments, you’ll need an online broker. Here you’ll open an account and buy and sell investments yourself over time. We’ll give you some tips on how to choose a broker below.
If you’d like an automated way to manage your investments, consider a robo-advisor. A robo-advisor will choose low-cost funds and rebalance your portfolio, keeping it in line with your investing preferences and timeline — for a fraction of the cost of hiring a human financial advisor. Keep reading for more on what to look for in a robo-advisor.
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2. Choose where to open your IRA
Once you’ve identified your investing style, the next step is choosing a provider that fits your preference.
For hands-off investors
Robo-advisors are great for those who agonize over investment decisions. Look for one with a low management fee — generally 0.40% or less — and services that meet your needs. Automatic rebalancing and portfolio allocation are usually standard, but others — such as access to human financial advisors — can vary by provider.
For hands-on investors
Look for a broker that has low or no account fees and small commissions; offers a wide selection of no-transaction-fee mutual funds and commission-free exchange-traded funds; and provides solid customer support and educational resources, especially if you’re a new investor.
Also, pay attention to account minimums and any investment minimums. Some mutual funds may require a minimum investment of $1,000 or more. An ETF can be purchased by the share, making it less expensive to get into, especially if you choose a commission-free fund.
» Check out all of our top picks for best IRA accounts
3. Open an account
The actual steps will vary slightly by provider, but opening an IRA is pretty easy. In general, you’ll head to the provider’s website, choose the type of IRA you want to open (Roth or traditional) and fill in some personal details such as your Social Security number, date of birth, contact information and employment information. Once you've opened the account, you'll see your options for how to fund it.
4. Fund your account and get started
Once you’ve decided where to open your account, you’ll need to select how you want to fund it. Usually you’ll do this by transferring funds from a bank account, transferring existing IRA assets from a different firm into your new account, or rolling over a 401(k).
Just remember that IRAs have an annual contribution limit of $7,000 in 2024 ($8,000 if age 50 or older), but you don't have to contribute that much. When it comes to retirement, starting with any amount early on is better than nothing. What's more, you don't have to fund it all at once. A common strategy, known as dollar-cost averaging, is to make regular contributions at regular intervals. For example, perhaps you stash away $100 per month in your IRA.
Both Roth and traditional IRAs also have income limits. However, traditional IRAs only have income limits if you or your spouse have a retirement account at work. Here are the Roth IRA income limits:
Filing status | 2023-2024 Income range | Maximum annual contribution |
|---|---|---|
Single, head of household or married filing separately (if you didn't live with spouse during year) |
|
|
| Contribution is reduced. | |
| No contribution allowed. | |
Married filing jointly or qualifying widow(er) |
|
|
| Contribution is reduced | |
| No contribution allowed | |
Married filing separately (if you lived with spouse at any time during year) | Less than $10,000 | Contribution is reduced |
$10,000 or more | No contribution allowed |
Are you rolling over a 401(k)?
If you have a 401(k) from an old job, you can move those funds into your new employer’s retirement plan or into an IRA by doing a 401(k) rollover. For many people, rolling over into an IRA is the best option, given that IRAs tend to have a wider array of investment choices and lower fees than many 401(k)s.
The IRA provider will help you do this — many have “rollover specialists” on staff — but the basics are simple: You’ll contact your former employer’s plan administrator and complete a few forms, and they will send your account balance (via check or by wiring the funds) to your new provider.
» Ready to get started? See the best IRA providers for a 401(k) rollover.
Are you funding from your bank or brokerage?
You’ll need your account number and routing number. If you’re just starting out, it may be helpful to set up automatic transfers.
These limits cover multiple accounts, so if you have both a Roth and a traditional account, you’ll need to keep your total contributions at or under the maximum.
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How should you choose your investments?
If you decide to use a robo-advisor for your IRA, you don’t actually need to choose your investments. Your robo-advisor will ask you for your goals and preferences and select investments that match up with them, and even adjust those investments over time. That’s it; you’re done.
If you’re going the hands-on route with an online broker, consider building a portfolio out of low-cost index funds and ETFs. This approach makes it easier to ensure adequate diversification in your portfolio (which lowers your investing risks) and helps minimize the fees you’ll pay.
You can explore this topic in more detail in our article on investing your IRA.
Benefits of an IRA
Got more questions about how to open an IRA? We have answers
Where is the best place to open an IRA?
Many brokerages offer competitive IRAs. NerdWallet’s analysis of the best IRA accounts can help narrow your search and focus on the features that matter most to you.
Can I open an IRA at a bank?
Yes, many banks offer IRA accounts. But with a bank IRA, generally your money will go into a type of savings vehicle, such as a certificate of deposit, that offers a much lower rate of return than, say, a stock and bond portfolio might enjoy. For a long-term goal like retirement — where you have the time to let your account ride out any market declines — it makes sense to invest for growth. That's why we don't include banks on our top picks for best IRA accounts.
Who is eligible to open an IRA?
Anyone can open a traditional IRA but if you (or your spouse if you're married) contribute to a retirement plan at work, then there are income limits that might restrict your ability to deduct your IRA contribution.
Here are the traditional IRA income limits for 2023 and 2024 — these traditional IRA income limits apply only if you (or your spouse) have a retirement account at work:
Filing status | 2023 income range | 2024 income range | Deduction limit |
|---|---|---|---|
Single or head of household (and covered by retirement plan at work) | $73,000 or less. | $77,000 or less. | Full deduction. |
More than $73,000, but less than $83,000. | More than $77,000, but less than $87,000. | Partial deduction. | |
$83,000 or more. | $87,000 or more. | No deduction. | |
Married filing jointly (and covered by retirement plan at work) | $116,000 or less. | $123,000 or less. | Full deduction. |
More than $116,000, but less than $136,000. | More than $123,000, but less than $143,000. | Partial deduction. | |
$136,000 or more. | $143,000 or more. | No deduction. | |
Married filing jointly (spouse covered by retirement plan at work) | $218,000 or less. | $230,000 or less. | Full deduction. |
More than $218,000, but less than $228,000. | More than $230,000, but less than $240,000. | Partial deduction. | |
$228,000 or more. | $240,000 or more. | No deduction. | |
Married filing separately (you or spouse covered by retirement plan at work) | Less than $10,000. | Less than $10,000. | Partial deduction. |
$10,000 or more. | $10,000 or more. | No deduction. |
With a Roth IRA, you can never deduct your contributions — your money goes in after-tax — but there are income limits that restrict who can contribute to a Roth.
Here are the Roth IRA income limits in 2023 and 2024:
Filing status | 2023-2024 Income range | Maximum annual contribution |
|---|---|---|
Single, head of household or married filing separately (if you didn't live with spouse during year) |
|
|
| Contribution is reduced. | |
| No contribution allowed. | |
Married filing jointly or qualifying widow(er) |
|
|
| Contribution is reduced | |
| No contribution allowed | |
Married filing separately (if you lived with spouse at any time during year) | Less than $10,000 | Contribution is reduced |
$10,000 or more | No contribution allowed |
What is the minimum to open an IRA?
The IRS doesn't require a minimum amount to open an IRA. However, some providers do require account minimums, so if you've only got a small amount to invest, find a provider with a low or $0 minimum. Also, some mutual funds have minimums of $1,000 or more, so you need to account for that as you choose your investments. But many investments have no or a low account minimum. Focus on those if you're on a tight budget.
How much does it cost to open an IRA?
There isn't typically an opening fee, though there are a few potential up-front costs. Some brokers and robo-advisors require a minimum amount to open an account, so you'll either have to come up with that dollar figure or choose a different provider. You'll also need enough money to purchase investments you want in your IRA. Some mutual funds have a $1,000, or higher, minimum investment; some investments don't have minimums at all. Some brokers also charge trading commissions when you buy or sell investments, typically $5 to $10. If you invest in mutual funds or ETFs, you'll pay an expense ratio and possibly other fees as well. The good news is many popular index mutual funds have very low fees — some charge 0.3% or less annually.
What if I'm not sure how to invest my IRA?
We've got a page dedicated to how to invest within your IRA. The good news is, you don't need to be an investing expert to pick appropriate investments for your IRA. But if you're still anxious about it, you can even consider opening your IRA with a robo-advisor, which will pick your investments for you based on your goals and risk tolerance. You can see our picks for the best robo-advisors for some inspiration.
Can I transfer an old 401(k) to an IRA?
Yes. Moving your funds from a 401(k) at a former employer to an IRA is a straightforward process, and most 401(k) and IRA providers are well-equipped to handle it. You can learn how it all works in our 401(k) rollover guide.
