You need a brokerage account to hold a Roth IRA, not a bank account

A Roth IRA is not something you buy in the way you buy a CD or a bond. Instead, you open a Roth IRA account at a brokerage firm — a company that lets you hold and trade investments. The brokerage holds the account structure (the "IRA" part), and you decide what to invest the money in once it is there. Common brokerages include Fidelity, Vanguard, Charles Schwab, and E*TRADE, but there are dozens of others.

The account itself is free to open. You do not pay a fee to create the account or to hold it, though you may pay fees on individual investments you buy inside it — that depends on what you choose to invest in and which brokerage you use.

Key Takeaways

  • You open a Roth IRA at a brokerage firm by filling out an online form with your name, Social Security number, address, and employment information.
  • After your account is approved (usually within one to three business days), you transfer money into it and then choose what investments to buy.
  • You can only contribute money you earned from work in that calendar year, up to the annual limit set by the IRS — the limit changes every few years.
  • Once money is in the account, you can hold it in cash, buy individual stocks or bonds, or buy mutual funds and exchange-traded funds (ETFs).
  • You cannot withdraw your contributions before age 59½ without penalty, though you can withdraw the money you contributed (not the earnings) at any time.

Choose a brokerage and gather your information

Start by picking a brokerage. Look at whether they offer the types of investments you want to buy — if you want to buy individual stocks, all major brokerages do that. If you want to buy a specific mutual fund or ETF, check whether that brokerage carries it. Also check their fee structure: some charge per trade, some charge nothing, and some charge annual account fees if your balance is below a certain amount.

Before you start the application, have these documents or information ready: your Social Security number, your date of birth, your current address, your employment status (employed, self-employed, retired, or unemployed), and your employer's name if you are employed. Some brokerages also ask for your annual income and net worth, though these are not hard requirements — they are used to assess your risk profile.

Complete the account application online

Go to the brokerage's website and look for a link to open a new account. You will fill out a form with your personal information, then specify that you want to open a Roth IRA (not a traditional IRA, not a taxable brokerage account). The form will ask you to confirm that you understand the contribution limits and the withdrawal rules.

You will also choose how the account is registered — whether it is in your name alone, or jointly with a spouse. For most people, a Roth IRA is individual, not joint. If you are married, each spouse opens their own separate Roth IRA.

The brokerage will verify your identity, usually by checking your Social Security number and address against public records. This typically takes one to three business days. You will receive an email when the account is approved.

Fund the account by transferring money in

Once your account is open, you need to move money into it. You can do this by linking your bank account to the brokerage and transferring money electronically (usually called an ACH transfer), or by mailing a check. Electronic transfer is faster — it typically takes one to three business days. A check can take five to ten business days to clear.

The money sits in the account as cash until you tell the brokerage what to do with it. You are not required to invest it immediately. Some people transfer money in and then take time to decide what to buy.

Decide what to invest in and place your first purchase

Once the cash is in your account, you can buy investments. Log into your account and look for a "buy" or "trade" button. You will search for the investment by its ticker symbol (a short code like "VTI" for a Vanguard total stock market fund, or "AAPL" for Apple stock) and enter how many shares you want to buy.

If you are new to investing, mutual funds and ETFs are simpler than individual stocks because they hold dozens or hundreds of investments in one fund, spreading your risk. Many people start with a single broad index fund — a fund that tracks an entire market, like the S&P 500 or the total U.S. stock market.

Your first purchase will settle (the money will leave your account and the shares will appear) within one to two business days. After that, you can buy and sell as often as you want within the account without triggering taxes.

Understand the contribution limits and timing

You can only put money into a Roth IRA if you earned income from work that year. The IRS sets an annual limit on how much you can contribute. This limit changes every few years — it has been $6,500 for 2023 and 2024, but it may be higher in future years. Check the IRS website or your brokerage's website to confirm the current year's limit.

You can contribute for the current year until December 31, or you can contribute for the previous year until the tax filing deadline (usually April 15 of the following year). For example, in April 2024, you could still contribute to a 2023 Roth IRA. Your brokerage will ask you which year the contribution is for when you fund the account.

Know the rules for withdrawing money later

Money you contribute (the amount you put in) can be withdrawn at any time without penalty or taxes. Money your investments earn (the growth) cannot be withdrawn before age 59½ without a 10% penalty and income taxes, with a few exceptions — such as if you become disabled, or if you are a first-time homebuyer withdrawing up to $10,000.

This is one of the main advantages of a Roth IRA: if you need your own money back, you can get it. But the earnings stay locked until retirement age. If you think you might need the money within a few years, a Roth IRA may not be the right place for it — a high-yield savings account or a CD would be safer.

Frequently Asked Questions

Do I need a minimum amount of money to open a Roth IRA?

Most brokerages do not require a minimum to open the account itself. However, some brokerages have a minimum for certain investments — for example, you might need $1,000 to buy into a specific mutual fund. You can open the account with $0 and fund it later, or start with whatever amount you have.

Can I open a Roth IRA if I am self-employed?

Yes. You need earned income from self-employment to contribute, and the contribution limit is the same as for employees. If you are self-employed and have high income, you may also be able to open a Solo 401(k) or a SEP IRA, which allow larger contributions — ask your brokerage or a tax professional about those options.

What happens if I contribute more than the annual limit?

The IRS will charge you a 6% penalty tax on the excess amount each year it stays in the account. You can fix this by withdrawing the excess contribution (and any earnings on it) before your tax return is due. Your brokerage can walk you through this process if it happens.

Can I have more than one Roth IRA?

Yes, but your total contributions across all Roth IRAs cannot exceed the annual limit. For example, if the limit is $6,500 and you have two Roth IRAs, you could put $3,000 in one and $3,500 in the other, but not $6,500 in each. Most people keep one Roth IRA at one brokerage for simplicity.

How long does it take to start investing after I open the account?

If you transfer money electronically from your bank, the whole process typically takes three to five business days from the time you apply: one to three days for account approval, one to three days for the money to arrive, and then you can buy investments immediately. If you mail a check, add five to ten more days for it to clear.