Where to open a Roth IRA and what you need to start

You open a Roth IRA through a financial institution — a bank, brokerage firm, credit union, or investment company. The institution holds the account and the money inside it. You do not open a Roth IRA through the IRS or any government office; the IRS only sets the rules about what you can put in and take out.

Most brokerages and banks let you open an account online in 10 to 20 minutes. You will need a Social Security number, a current address, and a way to fund the account — usually a bank account or debit card. Some institutions require a minimum deposit to open; others do not. That minimum varies widely, from zero dollars at some brokerages to $500 or $1,000 at others.

The institution will ask you to choose how to invest the money — in stocks, bonds, mutual funds, or money market accounts, depending on what they offer. If you are not sure what to choose, many institutions offer target-date funds that automatically shift from stocks to bonds as you get older. You can change your investment choices later.

Key Takeaways

  • You open a Roth IRA at a bank, brokerage, credit union, or investment company, not through the government.
  • You will need your Social Security number, current address, and a way to fund the account, such as a checking account or debit card.
  • The amount you can deposit each year is capped by the IRS and depends on your age; for 2024, the limit is $7,000 for people under 50 and $8,000 for people 50 and older.
  • Your income must be below a certain threshold to contribute; the limit varies by filing status and changes each year.
  • You can move money between Roth IRAs without penalty, but moving money from a traditional IRA to a Roth IRA has tax consequences you should understand before doing it.

Income limits that determine whether you can contribute

The IRS sets an income ceiling for Roth IRA contributions. If your income is above that ceiling, you cannot contribute that year. The limit depends on your filing status — whether you file as single, married filing jointly, married filing separately, or head of household — and it changes every year.

For 2024, the income limits are roughly $146,000 for single filers and $230,000 for married couples filing jointly. If you earn above those amounts, you have other options: you can contribute to a traditional IRA instead, or you can use a "backdoor Roth" strategy, which involves contributing to a traditional IRA and then converting it to a Roth. A tax professional can walk you through whether a backdoor Roth makes sense for your situation.

Your income for this purpose is your modified adjusted gross income, or MAGI. This is not the same as your salary. It includes wages, self-employment income, interest, dividends, and some other sources. Your tax return shows your MAGI, or you can ask your tax preparer to calculate it.

Annual contribution limits and catch-up contributions

The IRS caps how much you can put into a Roth IRA each year. For 2024, the limit is $7,000 if you are under 50 years old, and $8,000 if you are 50 or older. The extra $1,000 for people 50 and up is called a catch-up contribution. These limits apply to all your IRAs combined — if you have both a Roth IRA and a traditional IRA, the $7,000 or $8,000 is split between them.

The IRS adjusts these limits every few years to account for inflation. You can find the current year's limit on the IRS website or by calling the IRS at 1-800-829-1040. Your financial institution will also tell you the limit when you log in to your account.

You can contribute at any time during the year, or you can wait until the tax filing deadline — usually April 15 of the following year — to make a contribution for the previous year. For example, you can contribute to your 2024 Roth IRA until April 15, 2025. Your financial institution will ask you which year the contribution is for.

How to fund your account after opening it

Once your account is open, you can add money by linking a bank account and transferring funds electronically, or by mailing a check to the institution. Most people use electronic transfer because it is faster — usually one to three business days. Some institutions also let you set up automatic monthly transfers, so money moves from your bank account to your Roth IRA on a date you choose.

You can also fund a Roth IRA by rolling over money from another retirement account. A rollover means moving money from one account to another. If you are rolling over from a traditional IRA or a 401(k) from a previous job, the rules are different, and you may owe taxes. A tax professional or your financial institution can explain the tax consequences before you move the money.

Moving money between Roth IRAs without penalty

You can move money from one Roth IRA to another without paying taxes or penalties, as long as you follow the rules. The most common way is a direct transfer: you contact the new institution and ask them to request the money from the old one. The money moves directly between institutions, and you never touch it. This is the safest method.

You can also do an indirect rollover, where the old institution sends you a check and you deposit it into the new Roth IRA within 60 days. If you miss the 60-day window, the IRS treats it as a withdrawal, and you may owe taxes and penalties. Direct transfers are simpler and avoid this risk.

You can move money between Roth IRAs as often as you want. This is different from moving money from a traditional IRA to a Roth IRA, which is a conversion and has different tax rules.

Converting a traditional IRA to a Roth IRA

If you have a traditional IRA and want to move that money to a Roth IRA, you do a conversion. Unlike a rollover between two Roth IRAs, a conversion has tax consequences. When you convert, you owe income tax on the amount you convert in the year you do it — as if you had withdrawn the money and earned it as income that year.

For example, if you convert $10,000 from a traditional IRA to a Roth IRA, you owe income tax on that $10,000 in the year of the conversion. If you are in the 24% tax bracket, you would owe roughly $2,400 in federal income tax. After you pay the tax, the money in the Roth IRA grows tax-free and you can withdraw it tax-free in retirement.

Conversions make sense for some people and not for others, depending on your current income, your tax bracket, and how much money you have in traditional IRAs. A tax professional can help you decide whether a conversion is worth it.

What happens if you contribute more than the limit

If you put more money into your Roth IRA than the IRS allows in a given year, you have made an excess contribution. The IRS charges a 6% penalty tax on the excess amount each year it stays in the account. You can fix this by withdrawing the excess and any earnings on it before your tax filing deadline.

If you discover an excess contribution after the deadline has passed, you can still withdraw it, but you will owe the 6% penalty for each year the excess sat in the account. For this reason, it is worth double-checking your contribution total before the end of the year, especially if you have multiple IRAs or if your income changed during the year.

Frequently Asked Questions

Can I open a Roth IRA if I am self-employed?

Yes. Your income limit is based on your net self-employment income after you subtract the self-employment tax deduction. If you are self-employed and your income is above the Roth IRA limit, you may also be able to open a Solo 401(k) or a SEP IRA, which have higher contribution limits. A tax professional can help you figure out which account works best for you.

What if my income goes above the limit partway through the year?

If you contribute early in the year and then your income rises above the limit, you have made an excess contribution. You can withdraw the excess and any earnings on it before your tax filing deadline to avoid the 6% penalty. Your financial institution can help you calculate how much to withdraw.

Do I have to invest the money right away after I open the account?

No. You can leave the money in a cash account or money market fund while you decide how to invest it. However, cash accounts earn very little interest, so most people move the money into stocks, bonds, or mutual funds within a few days or weeks. You can change your investment choices at any time.

Can someone else open a Roth IRA for me?

No. You must open the account yourself using your own Social Security number. However, if you are a minor with earned income, a parent or guardian can help you open an account. The account belongs to you, and you control it.

What if I want to close my Roth IRA?

You can close a Roth IRA at any time by withdrawing all the money. You will owe income tax and possibly a 10% penalty on any earnings you withdraw before age 59½, but contributions you made come out tax-free. Contact your financial institution for the steps to close the account.