How to Open a Roth IRA in Five Simple Steps

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 — making them good savings options for individuals who expect to be in a higher tax bracket in the future.

And since the IRS has increased contribution limits on Roth IRAs for 2024 and 2025, you can save even more than in previous years. In 2023, the maximum amount you could contribute to a Roth IRA was $6,500, with an extra $1,000 per year in "catch-up" contributions for adults ages 50 and over. In 2024 and 2025, however, you can contribute up to $7,000, as well as an extra $1,000 in catch-up contributions.

Sound appealing? Here’s how to open a Roth IRA in five simple steps.

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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 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. For 2025, the income cutoff levels rise to $150,000 and $236,000, respectively.

If your income exceeds this, your contribution limit will begin to phase out until it disappears. In 2024, the phase-out range for single filers is between $146,000 and $161,000 (rising to a range of $150,000 to $165,000 in 2025), and $230,000 and $240,000 for those married filing jointly (rising to a range of $236,000 to $246,000 in 2025).

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. Or consider qualifying for Roth IRA contributions by lowering your income.

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.

When searching for Roth IRA providers, it's important to compare minimum investment requirements and maintenance fees, if any. Also consider whether or not the company offers the types of investments you’re looking for (mutual funds, ETFs, etc.), how much it costs to trade and if the account offers any additional tools like a retirement calculator.

3. Fill out the paperwork

After choosing a provider, it's time to apply. In many cases, you can complete a Roth IRA application online, but you'll need to gather some paperwork in order to do so. Here's what you'll need to have on hand during the sign-up process.

• Driver's license, photo ID or passport
• Social Security number
• Bank routing number
• Checking or savings account number to transfer money to the account
• Proof of employment
• Name, address and SSN of the plan beneficiary

4. Choose investments

Next, you’ll need to choose the investments for your Roth IRA. You can choose to do this all by yourself or have an advisor do it for you. If you choose to do it yourself, you’ll need to decide on an appropriate asset allocation, based on your comfort level with risk and your time horizon to retirement.

Choose how much money you’ll put towards riskier investments and how much you’ll keep relatively more safe. You can also invest in a target-date retirement fund for a simple way to maintain diversification and risk levels.

5. Set up a contribution schedule

Instead of paying in one lump sum, you can fit regular contribution payments into your budget by setting up monthly transfers from your checking or savings account to your Roth IRA. As mentioned above, the Roth IRA contribution limit for 2024 and 2025 is $7,000 (or $8,000 if you're older than 50), which works out to be around $583 a month. If you can't afford this much each month, it stills pays to contribute what you can.

Pros and cons of a Roth IRA

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• Should You Use a Roth or Traditional IRA?
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• How to Convert a Traditional IRA to a Roth after 60