How to Set Up a Roth IRA
When you’re ready to learn how to open a Roth IRA and start saving for retirement, you can take the following steps.
1. Consult your financial advisor.
If you have a financial advisor, they may be able to help you or advise you on how to open a Roth IRA. Your financial advisor can also help you determine whether a Roth is the best tax strategy for you based on your present status and future financial goals.
A good financial advisor can also advise you on which assets should be kept in a Roth and which should be kept in other investment accounts.
2. Investigate the requirements
It is critical to understand the requirements before opening a Roth IRA. When your MAGI as a single filer surpasses $125,000 in 2021, your ability to contribute to a Roth IRA begins to phase out.
Contribution limits for married couples filing jointly are based on whether you or your spouse is covered by a job retirement plan, among other factors. In 2021, the phaseout began when your total MAGI as a married couple surpasses $198,000. Before contributing to a Roth IRA, consult with a financial adviser or check your employment circumstances.
3. Decide what you want to invest in.
Before adding assets to your Roth IRA, conduct market research, examine your risk tolerance, and consider your investing possibilities. You may wish to register a brokerage account if you want to invest in stocks and bonds or if you want to use mutual funds or exchange-traded funds (ETFs).
If you decide to store other types of assets in your Roth IRA, such as real estate, precious metals, or even businesses, you may need to speak with a specific form of the custodian and open a self-directed IRA. If you want to keep your Roth IRA as easy as possible, you can employ a robo-advisor.
The finest robo-advisors assist you in determining a portfolio allocation based on the information you provide about your risk tolerance, time horizon till retirement, and other factors that can affect your returns.
4. Locate the best investing platform
Before you register an account, consider what is important to you and conduct research. Finding the best investment platform for you is critical. To keep things easy, you may form a Roth IRA with a robo-advisor, which allows you to get started by completing a few simple questions about your risk tolerance and goals.
Your portfolio will be rebalanced automatically based on an algorithm. Brokerage firms and financial consultants, on the other hand, can assist you in setting up a Roth IRA that is more targeted to your overall long-term goals.
You can also choose a self-directed IRA if you want complete control over your IRA’s asset allocation. However, there may be additional regulatory requirements when using a self-directed IRA, so do your homework. Check out our recommendations for the top brokerage accounts if you’re seeking the greatest investment platform.
