How to Open a Roth IRA (Do It Today!)
Now that we’ve talked about what a Roth IRA is, it’s time to set one up. To start an account, you have to first pick a broker (someone who buys and sells investments on your behalf). Luckily, it’s not hard decide if you’re young or broke or both.
Of the following companies that I researched, only one would allow me to open a Roth IRA with no minimum deposit or fees.
- T.Rowe Price
- Fidelity
- Scottrade
- Vanguard
- Zecco
- Charles Schwab
- TD Ameritrade
- E*Trade
The decision was pretty much made for me. While I liked Vanguard’s investment strategy (the company is built on index funds, which have low expenses with good returns), I didn’t want to wait to save up $1000 to go with Vanguard. (Other companies wanted at least $500)
Another plus was E*Trade has cool commercials like this one.
So, to setup the account, all you have to do is download this form. (If you’re over 18, you can open it online here.) It asks for the standard information that you’d give any bank when you open up a new account. Address, Social security number, blah blah blah.
There is one section where it asks what your “investment objective” is. I chose Growth, since I’m willing to take some risks (I have 40-50 years until retirement) but not complete chance like Speculation. For trading, I chose 0-3 per month, although I honestly have no idea how often I’ll trade.
In section 9, “Select Your Account Options”, I chose the E*Trade Financial Extended Insurance Retirement Sweep Deposit Account. This is basically just a saving account where your money hangs out until you invest it. Beside this section, you’ll notice you can choose to receive certain account information through the mail. DO NOT select any of these unless you want to pay a fee to E*Trade. (Hint: You don’t)
Once the form is filled out, put it in an envelope along with a check made out to E*Trade Clearing LLC for any amount. The address is listed on the 1st page, in the upper left hand corner. Mail it.
Seriously, that’s it.
Once E*Trade sets up the account, you’ll be ready to invest.
February 19th, 2010 at 3:42 am
You can just buy ETF’s in the fund you want at first instead of having to sit around waiting to save up cash in order to meet a fund’s minimum investment. Also, some funds have smaller minimums for retirement accounts than standard brokerage accts.
February 19th, 2010 at 10:05 am
Eric, good to know. I’ll have to look closer at all the options.