Here’s what you need to know in order to easily open a Roth IRA
By Erin Bendig – Kiplinger Report
Are you looking to open a Roth IRA to let your money grow tax-free? Roth IRAs are individual retirement accounts that let you save for retirement with after-tax dollars. Since taxes are paid on contributions before they’re placed in the account, withdrawals from a Roth IRA can be made tax-free at a later date. And since the IRS has increased contribution limits on Roth IRAs for 2024, you can save even more than in previous years.
Here’s how to open a Roth IRA in five simple steps.1. Make sure you’re eligible to open a Roth IRA
The first step in opening a Roth IRA is determining if you’re eligible. In order to be eligible for a Roth IRA, you’ll need to have an earned income, and this income must be within certain limits.
In 2024, in order to contribute the maximum amount to your Roth IRA ($7,000 or $8,000 if you are 50 or older) your income must be no more than $146,000 for single filers or $230,000 for those married filing jointly.
If your income exceeds this, your contribution limit will begin to phase out until it disappears. The phase out range for single filers is between $146,000 and $161,000, and $230,000 and $240,000 for those married filing jointly.
If you make more than this, you could potentially benefit from using a backdoor Roth IRA, where you convert a traditional IRA to a Roth.2. Choose a provider
Now you’ll need to choose where to open an account. Roth IRA accounts can be opened through a number of places, including mutual fund firms, full-service brokerages and financial planning firms. You can open a Roth IRA account at almost all investment companies. If you’re planning on picking your own investments, opening a Roth IRA at an online broker is a good choice. On the other hand, if you’re more of a hands-off investor, consider a robo-advisor.