What is a Roth IRA and How to Start?

A Roth IRA is an individual retirement account that allows you to invest after-tax dollars that grow tax-free and can be withdrawn at age 59 and ½. Each year, the maximum contribution permitted in a Roth IRA account is $6,000. However, for investors age 50 and above, the maximum contribution allowed increases to $7,000.

Piggy bank with two eggs on top of bills.

The steps to begin investing in a Roth IRA consists of the following:

  1. Make sure you’re eligible – anyone who has earned income during the tax year is eligible to contribute to a Roth IRA; eligibility begins to phase out at $129,000 to $144,000 for single individuals and $204,000 to $214,000 for individuals who are married filing jointly
  2. Decide where to open your Roth IRA – consider fees to open or maintain an account, consider the customer service of the company you’re considering opening an account with, consider the cost to trade, etc
  3. Apply for your account – gather all of your basic information and apply for a Roth IRA account with the company you chose in step 2
  4. Begin investing – before you begin investing consider your goals for investing and choose what to invest in based on those goals
Woman on her phone with her laptop in front of her.

A Roth IRA account is a great tool to utilize when planning for your future. It allows you to take advantage of compound interest and have tax-free dollars to withdraw at retirement.

Most asset management companies offer a Roth IRA as an investment vehicle. Below are four asset management companies we recommend to start a Roth IRA with:

  1. Fidelity
  2. Charles Schwab
  3. Merrill
  4. J.P. Morgan