How to open an IRA account

You open an IRA by choosing a financial institution—a bank, brokerage, or credit union—and completing their account application. The institution holds the account and the money inside it. You decide whether you want a Traditional IRA (contributions may reduce your taxes now) or a Roth IRA (withdrawals in retirement are tax-free). Most institutions let you apply online in 10 to 15 minutes. You'll need your Social Security number, proof of income or employment, and a funding method—a bank account to transfer money from, or a check to deposit.

The account itself opens immediately, but you cannot deposit money until the application is complete and verified. Verification usually takes one to three business days. Once verified, you can fund the account right away. There is no waiting period between opening and depositing—the institution simply needs to confirm your identity first.

Key Takeaways

  • You can open an IRA at any bank, brokerage, or credit union that offers them; there is no single government office or application.
  • Traditional IRAs let you deduct contributions on your taxes in the year you make them, while Roth IRAs let you withdraw money tax-free in retirement.
  • The application takes 10 to 15 minutes online and requires your Social Security number, proof of income, and a way to fund the account.
  • Your account opens immediately, but you cannot deposit money until the institution verifies your identity, which usually takes one to three business days.
  • You can open an IRA even if you do not have an employer retirement plan, and you can open multiple IRAs as long as your total contributions stay within the annual limit.

Traditional IRA vs. Roth IRA: Which one to choose

The main difference is when you get the tax benefit. With a Traditional IRA, you may deduct your contributions from your income taxes in the year you make them—meaning you pay less in taxes now. The money grows tax-free inside the account, but you pay income tax on withdrawals in retirement. With a Roth IRA, you contribute money that has already been taxed, so you get no tax deduction now. But the money grows tax-free, and you pay no tax on withdrawals in retirement.

Choose Traditional if you expect to be in a lower tax bracket in retirement than you are now, or if you want to lower your taxable income this year. Choose Roth if you expect to be in a higher tax bracket in retirement, or if you want tax-assistance programs available in retirement. Roth IRAs also have no required withdrawals at any age, while Traditional IRAs require you to start withdrawing at age 73 (as of 2023). Income limits apply to Roth contributions—if you earn above a certain amount, you cannot contribute directly to a Roth, though you may be able to use a "backdoor Roth" strategy.

Where to open an IRA: Banks, brokerages, and credit unions

You can open an IRA at a bank, an online brokerage, a credit union, or an investment firm. Banks and credit unions are simpler if you want to keep your money in savings or money market accounts—they offer lower returns but no investment risk. Brokerages (like Fidelity, Charles Schwab, Vanguard, or E-Trade) let you invest in stocks, bonds, mutual funds, and exchange-traded funds (ETFs), which can grow faster over time but carry market risk.

Compare fees before you choose. Some institutions charge annual account maintenance fees, transaction fees, or fund expense ratios. Many brokerages charge no annual fee and offer low-cost index funds. Banks may charge $25 to $50 per year. Credit unions often charge nothing. The institution you choose does not lock you in—you can transfer your IRA to a different institution later without penalty, though the process takes one to two weeks.

What you need to open an IRA

Gather these documents and information before you start the application:

  • Your Social Security number
  • Your date of birth
  • Your current address
  • Proof of income (a recent pay stub, tax return, or 1099 form if you are self-employed)
  • A bank account number and routing number to fund the account, or a check to mail in
  • Your employment status (employed, self-employed, retired, or unemployed)

If you are opening the account online, the institution will ask you to verify your identity—usually by answering security questions based on your credit history, or by uploading a photo of your driver's license. This verification protects you from fraud and is required by federal law. Once verified, you can fund the account immediately.

How much you can contribute each year

The annual contribution limit is set by the IRS and changes each year. For 2024, you can contribute up to $7,000 to an IRA (Traditional, Roth, or a combination of both). If you are age 50 or older, you can contribute an additional $1,000 as a "catch-up" contribution, for a total of $8,000. These limits apply to your total across all IRAs you own—if you have two IRAs, your combined contributions cannot exceed the limit.

You must have earned income to contribute to an IRA. Earned income means wages from a job, self-employment income, or taxable alimony. Investment income, Social Security, or pension payments do not count. If you are married and one spouse does not work, the working spouse can open a "spousal IRA" for the non-working spouse and contribute on their behalf, as long as the couple's combined earned income is at least equal to the contribution amount.

You can contribute at any time during the year, or you can wait until the tax deadline (usually April 15 of the following year) to make contributions for the previous year. Many people wait until tax time to see how much they can afford to contribute.

Funding your IRA after it opens

Once your account is verified and open, you can fund it in several ways. The most common is a direct transfer from your bank account—you provide your bank's routing number and your account number, and the institution pulls the money electronically. This usually takes one to three business days. You can also mail a check to the institution, though this takes longer (five to seven business days). Some brokerages let you link your bank account and transfer money instantly.

If you are moving money from an existing IRA at another institution, you can do a rollover or a transfer. A rollover means the old institution sends you a check, and you deposit it into the new IRA within 60 days. A transfer means the two institutions move the money directly between accounts—this is simpler and avoids the 60-day deadline. Ask your new institution to initiate a transfer; they will handle the paperwork with your old institution.

What happens after you open your IRA

Once your account is open and funded, you own it and control it. If you opened a Traditional IRA at a bank, your money sits in a savings or money market account earning interest. If you opened a Roth IRA at a brokerage, you choose which investments to buy—stocks, bonds, mutual funds, or ETFs. You can change your investments anytime, buy and sell without penalty, and add more money each year up to the contribution limit.

You cannot withdraw money before age 59½ without paying a 10% penalty, with some exceptions (first-time home purchase up to $10,000, education expenses, disability, or hardship). Roth IRAs have an additional rule: you can withdraw your contributions (the money you put in) anytime without penalty, but earnings (the growth) are subject to the age and holding-period rules. Traditional IRAs have no such distinction—all withdrawals before 59½ are penalized unless an exception applies.

Keep records of your contributions each year. The institution sends you a statement, but you should also track contributions yourself for tax purposes. If you contribute more than the annual limit by mistake, you can withdraw the excess and any earnings on it before the tax deadline to avoid penalties.

Frequently Asked Questions

Can I open an IRA if I do not have a job?

No, you need earned income to contribute to an IRA. Earned income means wages from employment or self-employment. If you are married and your spouse works, your spouse can open a spousal IRA for you and contribute on your behalf, as long as their earned income covers the contribution amount.

Can I open an IRA if my employer offers a 401(k)?

Yes. You can have both a 401(k) and an IRA at the same time. However, if you have a 401(k) and earn above a certain income threshold, you may not be able to deduct Traditional IRA contributions on your taxes. Roth IRA contributions have separate income limits. Check the IRS rules for your income level.

How long does it take to open an IRA?

The application takes 10 to 15 minutes online. Identity verification takes one to three business days. Once verified, you can fund the account immediately. If you mail in a check, add five to seven business days for the check to arrive and clear.

Can I open multiple IRAs?

Yes, you can open as many IRAs as you want. However, your total contributions across all IRAs cannot exceed the annual limit ($7,000 in 2024, or $8,000 if you are 50 or older). If you exceed the limit, you must withdraw the excess and any earnings before the tax deadline.

What if I change my mind after opening an IRA?

You can close an IRA anytime and move the money to another IRA or back to your bank account. If you move it to another IRA, there is no tax consequence. If you withdraw the money as cash, you pay income tax on the full amount (Traditional IRA) or on the earnings only (Roth IRA), plus a 10% penalty if you are under 59½, unless an exception applies.