How to open a Roth IRA – an excellent alternative to consider for retirement

While Roth IRAs seem relatively new, they’ve been around since 1997. More accustomed to a traditional IRA, many Americans aren’t up to speed on how Roth IRAs work.
Roth IRAs are a great alternative to a traditional IRA, and there are a couple of reasons you should consider opening one if you haven’t already.
A traditional IRA offers tax benefits upfront that a Roth IRA doesn’t. Despite this, by the time you retire, you’ll likely be more pleased if you choose to go down the Roth IRA route.
Roth IRAs allow you to withdraw the money you contribute whenever you like, while traditional IRAs implement a penalty if you try to withdraw your money before the age of 59 and a half.
Your contributions go into a Roth IRA account after you’ve already been taxed on them, so you don’t have to wait until you hit retirement age to take out your funds.
Keep in mind that it’s only your contributions that don’t have to be taxed. If you withdraw any accumulated earnings in your account, they’re subject to being taxed.
READ MORE: Roth IRA explained: How much you can contribute to your savings fund every year
No requirement of a minimum contribution
As of 2023, if you have a 401(k) or traditional IRA account, it is mandatory to start taking money out of it when you hit age 73. The amount you must take out yearly is dependent on your life expectancy year to year. These compulsory withdrawals are called minimum distributions. Roth IRAs do not have such regulations.
In tax-advantaged retirement accounts, such as traditional IRAs and 401(k) plans, your investments grow without being taxed. You’re only taxed upon taking the money out of these accounts.
With a Roth IRA though, you won’t pay tax on any of your gains as long as they remain in the account. You also don’t pay tax on qualified distributions, and they are typically those made after the age of 59 and a half. This can be advantageous in terms of retirement income, especially if you’re in a high tax bracket.
A Roth IRA can be opened at any tax brokerage or financial services firm.
When you’d like to make a Roth IRA contribution, contact your brokerage or financial services firm and let them know. Like any other type of investment account, you’ll have to give them fundamental details such as your name, date of birth, and address, as well as financial information like your bank routing numbers and your employer.
Upon opening your account, you can generally invest in a range of financial products like stocks, bonds, mutual funds and ETFs.
It’s a good idea to set up automated contributions to your Roth IRA throughout the year to ensure you’re saving on a consistent schedule.
For example, if you’re determined to meet the maximum 2023 contribution of $6,500, you’d have to set aside about $541.66 per month.