Opening a Roth IRA takes about 15 minutes online, and you can start with as little as $0 if you choose a brokerage with no minimum

A Roth IRA is a retirement account where you contribute money that has already been taxed, and then your withdrawals in retirement are tax-free. You pick a brokerage — a company that holds the account — fill out a form with your name, Social Security number, and address, link a bank account, and deposit money. That's the account opening. Then you decide what to invest the money in: stocks, bonds, mutual funds, or target-date funds that automatically shift from aggressive to conservative as you near retirement.

The main decision before you open is whether a Roth IRA makes sense for your income level. The IRS limits who can contribute directly to a Roth based on how much you earn. For 2024, if you're single, you can contribute the full amount if your income is below $146,000. If you're married filing jointly, the limit is $230,000. If you earn above those thresholds, you can still fund a Roth through a "backdoor Roth" conversion, but that's a separate process. If your income is below the limit, you can move forward with opening an account.

Key Takeaways

  • You can open a Roth IRA at any brokerage — Fidelity, Vanguard, Charles Schwab, and Betterment are common choices — and many have no account minimum or charge no fees.
  • You contribute up to $7,000 per year (for 2024) if you're under 50, or $8,000 if you're 50 or older, but only if your income is below the IRS limits for your filing status.
  • Money you put in can be withdrawn anytime without penalty, but earnings can only be withdrawn tax-free after age 59½ and once the account has been open for at least five years.
  • After you open the account and deposit money, you must choose what to invest in — leaving cash sitting in the account means it earns almost nothing.

Choose a brokerage and open the account online

Pick a brokerage based on whether you want to manage your own investments or prefer something more hands-off. Fidelity, Vanguard, and Charles Schwab are large, established brokerages with low or no fees. Betterment and Wealthfront are robo-advisors that automatically invest your money based on your age and risk tolerance. Credit unions and some banks also offer IRAs, though they typically limit you to CDs or savings accounts, which earn very little.

Go to the brokerage's website and look for "Open an IRA" or "New Account." You'll enter your name, date of birth, Social Security number, address, and employment status. Have your driver's license or passport nearby — some brokerages verify your identity instantly online. Link a checking or savings account so you can transfer money in. The whole process takes 10 to 20 minutes. You'll receive a confirmation email with your account number.

Deposit money into your new account

Once your account is open, transfer money from your bank. You can deposit as much as you want, but the IRS limits how much counts as a tax-deductible or tax-free contribution each year. For 2024, that limit is $7,000 if you're under 50, or $8,000 if you're 50 or older. Any amount over that limit can still sit in the account, but it won't get the tax benefits of a Roth contribution.

You can deposit a lump sum or set up automatic monthly transfers. Many people contribute $583 per month to hit the $7,000 annual limit, or whatever amount fits their budget. There's no penalty for contributing less than the maximum — contribute what you can afford. The deadline to contribute for a given tax year is the tax filing deadline the following year, usually April 15.

Choose your investments inside the account

After money lands in your Roth IRA, it sits as cash unless you tell the brokerage what to buy. This is the step many people skip, and it costs them. Cash in a savings account earns almost nothing — currently around 4% to 5% annually, but that's in a high-yield savings account. Most brokerage cash accounts earn far less.

If you don't want to pick individual stocks or bonds, choose a target-date fund. These are mutual funds designed for people retiring in a specific year — for example, a "2055 Target Date Fund" is built for someone retiring around 2055. The fund automatically holds a mix of stocks and bonds, and it shifts to more conservative investments as the target date approaches. Vanguard, Fidelity, and Schwab all offer target-date funds with low fees. Pick the fund closest to when you think you'll retire, and you're done.

If you want more control, you can build your own mix: for example, 70% in a total stock market index fund and 30% in a total bond market index fund. Index funds track a broad market rather than trying to beat it, and they have very low fees. Ask the brokerage's customer service which index funds they offer, or search their website for "index funds" — most have a list.

Understand the contribution and withdrawal rules

You can withdraw the money you contributed (not the earnings) anytime without penalty or taxes. So if you put in $10,000 and it grows to $12,000, you can pull out $10,000 whenever you want. The $2,000 in earnings stays locked until you're 59½ and the account has been open for at least five years.

There are a few exceptions where you can withdraw earnings early without the usual 10% penalty: if you're a first-time homebuyer (up to $10,000 lifetime), if you're disabled, if you're paying medical expenses that exceed 7.5% of your income, or if you're paying health insurance premiums while unemployed. Taxes still apply to early earnings withdrawals unless one of these exceptions fits, but the penalty is waived.

You don't have to take money out at any age — Roth IRAs have no required minimum distributions. This makes them useful for leaving money to heirs, since they inherit the account and can withdraw it tax-free (though they must follow specific distribution rules).

Set up annual contributions if you plan to contribute every year

If you want to contribute regularly, set up an automatic transfer from your bank to your Roth IRA. Most brokerages let you schedule monthly or quarterly transfers. This removes the need to remember to contribute and helps you build the habit of saving for retirement.

Keep track of how much you've contributed each year so you don't accidentally go over the annual limit. The brokerage will show your contributions on your account statement, but it's your responsibility to stay within the IRS limit. If you over-contribute, the IRS charges a 6% penalty each year the excess sits in the account, so it's worth double-checking.

Track your account and rebalance as needed

Check your account at least once a year to make sure your investments are still aligned with your goals. If you chose a target-date fund, it rebalances automatically. If you built your own mix, you may need to rebalance manually — for example, if stocks have grown so much that you're now 80% stocks instead of 70%, you might sell some stocks and buy bonds to get back to your target.

You don't need to trade frequently or chase market trends. The biggest factor in long-term retirement savings is how much you contribute and how long you leave it invested. A Roth IRA opened at 25 with $7,000 contributed annually will grow far more than one opened at 45, even if the later account earns a higher return, simply because of time in the market.

Frequently Asked Questions

Can I open a Roth IRA if I'm self-employed or a freelancer?

Yes. You can open a regular Roth IRA as long as you have earned income and your income is below the IRS limits. If you earn a lot as self-employed, you might also consider a Solo 401(k) or SEP IRA, which allow much higher contributions, but a Roth IRA is a good starting point.

What happens if I earn too much to contribute to a Roth IRA?

You can't contribute directly. However, you can do a "backdoor Roth" by contributing to a traditional IRA and then converting it to a Roth. This is a separate process with tax implications, so consult a tax professional if this applies to you.

Do I have to invest the money, or can I leave it in cash?

You can leave it in cash, but you'll earn almost nothing. Most brokerages pay less than 1% on cash balances. A target-date fund or index fund will likely earn more over time, though with more ups and downs in the short term.

Can I open multiple Roth IRAs?

You can open accounts at multiple brokerages, but your total contributions across all Roth IRAs cannot exceed the annual limit — $7,000 for 2024 if you're under 50. The IRS counts all your Roth accounts together.

What if I need the money before retirement?

You can withdraw your contributions anytime without penalty. Withdrawing earnings before 59½ usually triggers a 10% penalty plus taxes, unless you meet a specific exception like first-time homebuyer or disability.