How to Open an IRA in 4 Steps

Individual retirement accounts are important tools that help you save and invest for retirement. Unlike 401(k)s, which are largely accessed through workplace programs, an IRA is open to virtually anyone. Opening one is easy, and once you’ve done that, you can take your time funding the account and making investment selections.

What sort of investor are you — hands-on or hands-off? Your answer will help determine whether you should set up an IRA with an online broker or a robo-advisor.

If you want to choose and manage your investments, you’ll need an online broker. Here you’ll open an account, fund it with your IRA contribution and then select investments — typically mutual funds, stocks or bonds.

Look for a broker that has low or no account fees, offers a wide selection of no-transaction-fee mutual funds and commission-free exchange-traded funds, and provides solid customer support and educational resources, especially if you’re a new investor.

If you’d like an automated way to manage your investments, consider a robo-advisor. A robo-advisor will choose low-cost funds for you based on your retirement timeline and risk tolerance, for a fraction of the cost of hiring a human financial advisor. Robo-advisors are great for those want a professional to handle the investment decisions. Look for one with a low management fee and services that meet your needs. Automatic rebalancing and portfolio management are usually standard, but other features can vary by provider.

The actual steps involved in opening an IRA will vary slightly by provider, but the process itself is pretty straightforward. In general, you’ll head to the provider’s website or mobile app, choose the type of IRA you want to open (Roth or traditional) and fill in some personal details such as your Social Security number, date of birth, contact information and employment information.

Once you’ve opened the account, you’ll see your options for funding it.

Just remember that IRAs have annual contribution limits of $7,000 in 2024 and 2025 ($8,000 if age 50 or older). You don’t have to contribute that much, but you can’t contribute more than that limit. These limits cover multiple accounts, so if you have both a Roth IRA and a traditional IRA, you’ll need to keep your total contributions at or below the maximum.

When it comes to retirement, starting with any amount early on is better than nothing — and you don’t have to fund it all at once. A common strategy, known as dollar-cost averaging, is to make regular contributions at set intervals. For example, perhaps you stash away $100 per month in your IRA.

Some employers also allow you to make IRA contributions from your paycheck by splitting your direct deposit destinations.

If you want to contribute to your new IRA account from a bank account, you’ll need your account number and routing number. If you’re just starting out, it may be helpful to set up automatic transfers.

You can also transfer assets from an existing IRA — say you want to change account providers — into your new IRA, or you can contribute from a taxable brokerage account.

If you have a 401(k) from an old job, you can move those funds into an IRA by doing a 401(k) rollover. For many people, rolling over into an IRA is a convenient option — IRAs tend to have a wider array of investment choices.

The IRA provider will help you do this — many have “rollover specialists” on staff — but the basics are simple: You’ll contact your former employer’s plan administrator and complete a few forms, and they will send your account balance (via check or by wiring the funds) to your new provider.

If you decide to use a robo-advisor for your IRA, you don’t actually need to choose your investments. Your robo-advisor will ask you for your goals and preferences and select investments that match up with them, and even adjust those investments over time.

If you’re going the hands-on route with an online broker, consider building a portfolio out of low-cost index funds and ETFs. This approach makes it easier to ensure adequate diversification in your portfolio (which lowers your investing risks) and helps minimize the fees you’ll pay.