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How and Where to Open a Roth IRA

Investing, Retirement Planning, Roth IRA
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Opening a Roth IRA can be a smart way to supercharge your retirement savings. The process is easy:

  • Pick a provider: Either a broker, where you choose investments, or a robo-advisor who handles the investment choices for you. See our top picks below.
  • Pick your investments: If you go with a broker, look for low-cost mutual funds and ETFs. (If you choose a robo-advisor, they’ll pick these for you.)

Opening a Roth IRA can be a smart way to supercharge your retirement savings. The process is easy:

  • Pick a provider: Either a broker, where you choose investments, or a robo-advisor who handles the investment choices for you. See our top picks below.
  • Pick your investments: If you go with a broker, look for low-cost mutual funds and ETFs. (If you choose a robo-advisor, they’ll pick these for you.)

Opening a Roth IRA can be a smart way to supercharge your retirement savings. The process is easy:

  • Pick a provider: Either a broker, where you choose investments, or a robo-advisor who handles the investment choices for you. See our top picks below.
  • Pick your investments: If you go with a broker, look for low-cost mutual funds and ETFs. (If you choose a robo-advisor, they’ll pick these for you.)

A Roth IRA is a true gift for retirement savers: While there’s no immediate tax benefit, distributions in retirement are completely tax-free. But there are some rules for Roth IRAs, including income limits.

2 steps for opening a Roth IRA

There are two fundamental steps to starting a Roth IRA:

  1. Choose a brokerage or robo-advisor. 
  2. Choose the investments that will power your Roth IRA. (If you go with a robo-advisor, they usually do this for you.) 

Read on for more details on each of these steps.

» Not sure how a Roth IRA works? Read more: What is a Roth IRA?

1. Choose a brokerage or robo-advisor

If you want to choose your investments yourself, a brokerage is best for you. Read on below for tips on what to look for, plus a tool to help you find the best broker for you. But if you’d rather someone else handle the heavy lifting on choosing investments, consider a robo-advisor. They use computer algorithms to help create and manage investment portfolios, for a small fee.

»Interested in a robo-advisor? Check out our picks for the best robo-advisors.

»Ready to open a brokerage account? Check out our top picks for Roth IRA brokers.

If you like the idea of opening a Roth IRA at a brokerage, be sure to look for a broker that:

  • Has low or no account fees.
  • Offers a large selection of no-transaction-fee mutual funds and commission-free exchange-traded funds.
  • Provides strong customer service and investor education, especially if you’re new to investing.
  • Has a low account minimum and low fund minimums — these are two separate things. We’d hate for you to choose an online broker because it has no initial minimum deposit, only to realize later that most of the funds you want to invest in require $1,000 or more. Your money would likely have to sit in cash until you built up enough to buy in at the minimum level.

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Find the best Roth IRA

  • View NerdWallet's top picks.
  • Read reviews of account providers.
  • Open and fund your account.

Some other factors to consider in choosing a broker:

  • Do you want to trade stocks? You’ll want a broker with low commissions.
  • Are you eligible for a sign-up promotion or bonus? Many account providers offer these to new customers, though you may need to meet a certain deposit requirement. Don’t make a decision solely based on a promotion, but do take a look at the offers as you shop around.

2. Choose the investments

A Roth IRA is an account, not an investment. Contributing is just the first step. If you want to build wealth over time, you need to invest that money.

That involves figuring out what kind of investor you want to be. Are you the hands-off sort? Then a target-date fund might be for you. Target-date funds are diversified funds that automatically rebalance to take less risk as you get older. They’re a convenient, one-stop-shop, but they’ll cost you a bit more in fees.

If you want to try a hands-on approach, you can get that diversification on your own for less by building a portfolio out of index funds and ETFs. To do that, you’ll want to decide how much of your money to put toward riskier investments, like stock funds, and how much you want to keep relatively safe, in bond funds and cash. This mix is called your asset allocation. In general, you’ll want to take more risk when you’re younger, because you have time to weather the market’s ups and downs. As you get closer to retirement age, you may want to tone it down a bit.

IRAs give you access to a large pool of investment options, so once you’ve decided on your allocation, you can select specific funds to meet that. Many brokers have fund screeners to help you, and you can sort by expense ratio, asset class or any number of other features.

And if you get stuck? Use a model: Check out the portfolios used by robo-advisors (often displayed on their websites) and target-date funds, then mimic them, being sure to rebalance as needed since they won’t be doing it for you.

Is that it?

That’s it. Except, a handful of additional considerations:

  • If you have a 401(k) that offers matching dollars and you’re not contributing enough to earn them all, that’s where you should direct your retirement savings first. Read our Roth IRA vs. 401(k) article, which explains how you should prioritize the two accounts.
  • A Roth IRA is the best choice for many folks, but for some a traditional IRA might be better. Check out this story to figure out which is best for you.
  • Once you determine how much you can contribute, we suggest setting up automatic transfers to make sure it happens. Not only do you avoid the process of initiating the transfer each month, but you ensure you’re saving regularly. Many brokers also waive their initial deposit requirements if you agree to smaller automatic transfers each month. (For example: Schwab has a $1,000 account minimum, but you can skirt it by signing up for monthly auto-deposits of $100 or more.)
  • Be sure you don’t contribute too much. Contributing more than the limit may leave you subject to a penalty from the IRS. If your goal is to spread that $5,500 over a year, contribute $458.33 a month or $105.76 a week. If you’re 50 or older, you can contribute $541.66 a month or $125 a week. Keep in mind, too, that the contribution limit is for all your IRA accounts combined — if you have a Roth and a traditional, that limit is a total across both accounts.

Where to open a Roth IRA: Best providers

These providers offer a large fund selection, hiqh-quality customer service and reasonable account minimums and fees:

BrokerHighlightsCommissionsAccount MinimumCurrent OffersStart Investing
TD Ameritrade
TD Ameritrade
Show Details
Top research; two powerful trade platforms; educational content
Commissions
$6.95
per trade
Current Offers
$100-$600
in cash bonus with a qualifying deposit
Open an account
on TD Ameritrade's secure website
Show Details
Charles Schwab - Brokerage
Charles Schwab - Brokerage
Show Details
Large fund selection; premium research.
Commissions
$4.95
per trade
Current Offers
$100
cash bonus with a qualifying deposit
Open an account
on Charles Schwab - Brokerage's secure website
Show Details

These providers offer a large selection of mutual funds and ETFs with low expense ratios:

BrokerHighlightsCommissionsAccount MinimumCurrent OffersStart Investing
Fidelity - Brokerage
Fidelity - Brokerage
Show Details
Low commissions; free and robust research
Commissions
$4.95
per trade
Current Offers
300
commission-free trades with a qualifying deposit
Open an account
on Fidelity - Brokerage's secure website
Show Details
Vanguard Brokerage
Vanguard Brokerage
Show Details
Low-cost funds; strong customer service
Commissions
$6.95
per trade
Current Offers
None
no promotion available at this time
Open an account
on Vanguard Brokerage's secure website
Show Details

Robo-advisors Betterment and Wealthfront manage your portfolio for you:

BrokerHighlightsCommissionsAccount MinimumCurrent OffersStart Investing
Betterment
Betterment
Show Details
Offers access to human advisors for additional fee.
Commissions
0.25%management fee
Current Offers
Up to 1 year
of free management with a qualifying deposit
Open an account
on Betterment's secure website
Show Details
Wealthfront
Wealthfront
Show Details
Free management of first $15,000; advanced tax optimization strategies.
Commissions
0.25%management fee
Current Offers
$15,000
amount of assets managed with no fee
Open an account
on Wealthfront's secure website
Show Details

These providers have $0 minimum investment requirements for Roth IRAs:

BrokerHighlightsCommissionsAccount MinimumCurrent OffersStart Investing
Merrill Edge
Merrill Edge
Show Details
Breadth of research from other providers and own offering
Commissions
$6.95
per trade
Current Offers
$100-$600
in cash bonus with a qualifying deposit
Open an account
on Merrill Edge's secure website
Show Details
Etrade
Etrade
Show Details
Large selection; reasonable commissions and fees
Commissions
$6.95
per trade
Current Offers
60
days of commission-free trades with a qualifying deposit
Open an account
on Etrade's secure website
Show Details

» MORE: See our full list of top Roth IRA providers

Got more questions? We have answers

Many brokerages offer competitive Roth IRAs, so choosing one will require careful consideration of your needs and preferences as you shop. NerdWallet’s detailed analysis of the best Roth IRA accounts can help identify providers that align with your needs.

See our Roth IRA rules page, which provides current details on annual contribution limits, income eligibility and distribution requirements.

Our complete Roth IRA guide is home to a wide range of articles and tools, including pages dedicated to how to invest within your IRA and calculating the potential value your Roth contributions at various levels of return.

Yes. Moving your funds from a 401(k) at a former employer to a Roth IRA is a reasonably straightforward process, and most 401(k) and IRA providers are well-equipped to handle it. You can learn how it all works in our 401(k) rollover guide.

There are lots of factors to consider here, including your income, desired retirement age, monthly expenses, health status, future Social Security benefit levels and countless others. Our retirement calculator can help you gauge whether you’re saving enough to ensure a comfortable retirement and develop a plan to get the most from your savings.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

Updated Dec. 15, 2017.