How to open an IRA account
Each provider will have slightly different steps for opening your IRA account.
First, you'll be asked for some personal information, such as:
- Address
- Phone number
- Social Security number
- Date of birth
- Employment information
Next, you'll want to decide how to add funds to your IRA. Some options include:
- Linking a bank account
- Rolling over a 401(k) or similar retirement plan
- Transferring funds from another IRA account
- Wiring money
- Mailing a check
At this point, you just choose your investments and your IRA account is open.
Minimum to open an IRA
Some brokers require a minimum initial investment to open an IRA. This is more common if you're opting for a professionally managed IRA or want to put your IRA into a robo-advisor. Most of the brokers on our list don't have IRA account minimums.
Most brokers that offer traditional and Roth IRAs have no minimum deposit requirement, so you can get started with as little as a few dollars. If you're opening an account with a small initial investment, look for a brokerage with zero or low fees. You'll likely also want a broker that lets you purchase fractional shares or ETFs so you can buy into stocks even if you can't afford a full share.
IRA contribution limits 2024
The IRA contribution limit changes annually based on inflation, and also changes based on your age. These can be found at the IRS website.
For 2024, you can contribute:
- $7,000 if you are under 50
- $8,000 if you are 50 or over at the end of the calendar year
It's also important to mention that IRA contributions and the ability to deduct them on your tax return can be limited based on your income and employment situation. If you're looking for more information, it's best to reference the official IRS website for the most up-to-date details.
It's also worth noting that this is a per-person limit, not per account. In other words, you are allowed to have more than one IRA if you qualify (say, a traditional and a Roth), but your total contribution can't exceed the annual limit.
What investments are allowed in an IRA?
Most investments are allowed in an IRA.
For example, you can invest in any of these in an IRA account:
- Annuities
- Bonds
- CDs
- Certain cryptocurrencies
- ETFs
- Money market accounts (and funds)
- Mutual funds
- Real estate
- REITs
- Stocks
- Treasury bills
That said, there are certain investments that aren't allowed in any IRA, such as collectibles (like stamps or artwork) or real estate that you benefit directly from, like a primary residence or rental property. Plus, some brokers don't offer all of these types of investments.
Can you lose money in an IRA?
Yes, you can lose some or all of your money in an IRA. But if you invest conservatively in blue-chip stocks (those offered by strong, established businesses), ETFs, and mutual funds, the chance of losing all of your money can be greatly diminished.
Here are three ways that IRAs can lose money:
- Securities that lose value: This is the most common way to lose money in an IRA account. For example, you could invest in a stock whose company goes bankrupt, thus making your shares worthless.
- Market conditions: Your IRA account can also fluctuate due to market conditions, performing well when the economy is strong and poor when it goes through downturns and hiccups.
- Early withdrawals: You can also lose money through early withdrawal penalties. This might happen if you withdraw funds before you reach 59 1/2. While some early withdrawals may be allowed (such as for financial hardships), most will incur an additional income tax of 10% of the amount you withdraw.
How to withdraw from an IRA
If you've reached age 59 1/2, you can access money in your IRA penalty free. Most brokers and banks will give you plenty of ways to receive your money, such as electronic funds transfers, wire transfers, and paper checks.
However, if you're younger than 59 1/2, withdrawing money from your IRA can be expensive and cumbersome.
Fact Checked
Ashley Maready
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