Opening an IRA takes about 15 minutes online, but choosing which type and where to open it matters more than speed

You can open an Individual Retirement Account (IRA) at a bank, brokerage, credit union, or robo-advisor by filling out an online form with your name, Social Security number, address, and employment status. The institution will ask whether you want a Traditional IRA or a Roth IRA—this choice determines how your contributions are taxed now and how withdrawals are taxed later. Once you choose, you'll link a bank account to fund it, and the account opens immediately. You can then start investing the money you've contributed.

The real work is deciding where to open it and what to invest in. Different institutions charge different fees, offer different investment options, and provide different levels of guidance. A brokerage like Fidelity or Schwab gives you thousands of stocks and funds to choose from. A robo-advisor like Betterment or Vanguard Personal Advisor Services builds a portfolio for you based on your age and risk tolerance. A bank or credit union may limit you to CDs or mutual funds. Your choice depends on whether you want to pick investments yourself or have someone else do it.

Key Takeaways

  • You can open an IRA online in minutes at a bank, brokerage, or robo-advisor by providing your name, Social Security number, and address.
  • Traditional IRAs let you deduct contributions from your taxes now but tax withdrawals later; Roth IRAs tax contributions now but let withdrawals grow tax-free.
  • You can contribute up to $7,000 per year (or $8,000 if you're 50 or older) to an IRA, though you must have earned income to contribute.
  • After opening the account, you'll need to fund it by transferring money from your bank account or rolling over money from an old employer retirement plan.
  • Different institutions charge different fees and offer different investment choices, so comparing them before you open saves money over time.

Choosing between Traditional and Roth before you open

A Traditional IRA lets you deduct your contribution from your taxable income in the year you make it, which lowers your tax bill now. The money grows tax-free inside the account. When you withdraw it in retirement, those withdrawals are taxed as ordinary income. This works best if you expect to be in a lower tax bracket in retirement than you are now.

A Roth IRA does the opposite: you contribute money that has already been taxed, so you get no deduction now. The money grows tax-free, and withdrawals in retirement are tax-free too. This works best if you expect to be in a higher tax bracket in retirement, or if you want the flexibility to withdraw contributions (not earnings) without penalty before retirement age. Roth IRAs also have no required withdrawals at age 73, while Traditional IRAs do.

Income limits apply to Roth contributions if you earn above a certain threshold (the limit changes yearly and depends on your filing status). Traditional IRAs have no income limit, but the deduction phases out if you have a workplace retirement plan and earn above a certain amount. Check the IRS website or your institution's site for the current year's limits before you decide.

Where to open an IRA and what to compare

You can open an IRA at any of these types of institutions: a full-service brokerage (Fidelity, Charles Schwab, E*TRADE), a discount brokerage (TD Ameritrade, Interactive Brokers), a robo-advisor (Betterment, Wealthfront, Vanguard Personal Advisor Services), a bank (Chase, Bank of America, your local credit union), or a mutual fund company (Vanguard, Fidelity, Schwab also operate this way). Each has different strengths.

Compare these four things: account fees (some charge annual maintenance fees; many don't), investment options (can you buy individual stocks, or only mutual funds and ETFs?), fund expense ratios (the annual cost to hold a fund, expressed as a percentage), and customer support (phone, chat, or email availability). A brokerage with low or zero account fees and low-cost index funds will cost you far less over 30 years than one charging $50 annually plus 1% expense ratios. Use the fee calculators on each institution's website to see the difference.

If you don't want to pick investments yourself, a robo-advisor will build a portfolio based on your age and risk tolerance, then rebalance it automatically. You'll pay a management fee (usually 0.25% to 0.50% of your balance annually), but you avoid the cost of picking the wrong funds. If you want human advice, some brokerages offer it for a flat fee or a percentage of assets.

The steps to actually open the account

Go to the institution's website and look for "Open an IRA" or "New Account". You'll be asked to choose Traditional or Roth, then fill in personal information: your full name, date of birth, Social Security number, address, phone number, and email. You'll also state your employment status (employed, self-employed, retired, student) and whether you have other retirement accounts.

Next, you'll choose how to fund the account. Most institutions let you link a checking or savings account and transfer money electronically (this usually takes one to three business days). Some let you mail a check. A few let you transfer money from an old 401(k) or IRA at another institution—this is called a rollover, and it has specific rules about timing, so ask the institution for guidance if you're doing this.

After you fund the account, you'll choose what to invest in. If you opened at a brokerage, you can buy individual stocks, ETFs, or mutual funds. If you opened at a robo-advisor, the platform will ask you questions about your age, income, and risk tolerance, then suggest a portfolio. If you opened at a bank, you may see only CDs or a limited menu of mutual funds. Don't rush this step—you can leave the money in a money market fund or cash while you decide.

Contribution limits and earned income requirements

For 2024, you can contribute up to $7,000 per year to an IRA (Traditional, Roth, or a combination of both). If you're 50 or older, you can contribute an additional $1,000 as a "catch-up" contribution, for a total of $8,000. These limits change yearly, so check the IRS website or your institution's site at the start of each year.

You must have earned income to contribute to an IRA. Earned income means wages from a job, self-employment income, or taxable alimony. It does not include investment income, Social Security, pensions, or unemployment benefits. If you're married and one spouse doesn't work, the working spouse can contribute to a Spousal IRA in the non-working spouse's name, up to the same limit, as long as the couple's combined earned income is at least as much as the total contribution.

You can contribute to an IRA anytime during the year, but the deadline to contribute for a given tax year is usually April 15 of the following year (the tax filing deadline). If you miss the deadline, you cannot go back and contribute for that year. However, you can always contribute for the current year up until December 31.

Rolling over money from an old 401(k) or IRA

If you left a job and have money in an old 401(k), or if you have an IRA at another institution, you can move that money to your new IRA. This is called a rollover. The most common type is a direct rollover: the old institution sends the money directly to the new institution, and you never touch it. This avoids taxes and penalties.

A indirect rollover means the old institution sends you a check, and you deposit it into the new IRA within 60 days. If you miss the 60-day window, the IRS treats it as a withdrawal, and you'll owe income tax plus a 10% penalty if you're under 59½. Direct rollovers are safer because the money never passes through your hands.

When rolling over a Traditional 401(k) to a Traditional IRA, there are no tax consequences. Rolling a Traditional 401(k) to a Roth IRA is possible but triggers income tax on the amount rolled over. Ask your old institution and your new institution for their rollover forms and instructions before you start—they'll walk you through it step by step.

What happens after you open and fund the account

Once your account is open and funded, you own it and can manage it yourself. You can buy and sell investments, transfer money in and out (subject to contribution limits), and change your investment choices anytime. You can also change institutions later by doing a rollover—there's no penalty for moving your IRA to a different bank or brokerage.

You cannot withdraw earnings from a Traditional IRA before age 59½ without paying income tax plus a 10% penalty, with some exceptions (first-time home purchase up to $10,000, education expenses, disability). You can withdraw contributions from a Roth IRA anytime without penalty, but earnings have restrictions. At age 73, you must start taking Required Minimum Distributions (RMDs) from a Traditional IRA—the IRS calculates how much based on your age and account balance. Roth IRAs have no RMD requirement during your lifetime.

Your institution will send you a statement at least quarterly showing your balance and transactions. You'll also receive tax documents each year (Form 5498 for contributions, Form 1099-R for distributions). Keep these for your records and when filing taxes.

Frequently Asked Questions

Can I open multiple IRAs?

Yes, you can open as many IRAs as you want at different institutions. However, your total contributions across all IRAs cannot exceed the annual limit ($7,000 or $8,000 if 50+). If you contribute to multiple IRAs in the same year, the total must stay within the limit, or you'll owe a penalty tax on the excess.

What if I don't have earned income?

You cannot open an IRA in your own name without earned income. If you're married, your spouse can open a Spousal IRA for you if they have earned income. If you're not married and have no income, you'll need to wait until you have a job or self-employment income.

Can I open an IRA if I already have a 401(k) at work?

Yes. You can have both a 401(k) and an IRA at the same time. However, if you have a workplace retirement plan, the deduction for Traditional IRA contributions phases out at higher income levels. Roth IRA contributions also have income limits. Check the current year's limits on the IRS website.

How long does it take to open an IRA?

The account opens immediately after you submit the form online, usually within minutes. However, it may take one to three business days for your bank transfer to arrive and settle, so you can't invest the money until then. Some institutions let you start investing before the transfer clears.

What if I change my mind about Traditional vs. Roth?

You can convert a Traditional IRA to a Roth IRA anytime, but you'll owe income tax on the amount converted. You can also open both types and split your contributions between them (as long as the total stays within the annual limit). There's no penalty for changing your mind, but there are tax consequences for conversions.