How to Open an IRA in Five Steps

The basic process: choose a provider, pick an account type, fund it, and invest

Opening an IRA means choosing a financial institution, deciding between a Traditional or Roth account, completing their paperwork, and depositing money. The whole process usually takes 15 minutes to an hour online, or longer if you do it in person at a bank branch. You do not need permission from anyone — the IRS does not pre-approve IRAs — and you can open one at any bank, brokerage, credit union, or robo-advisor that offers them.

The steps are the same whether you earn $20,000 or $200,000 a year, though your income does affect whether you can deduct contributions on your taxes (for Traditional IRAs) or whether you can contribute at all (for Roth IRAs). The real decision is not how to open one, but which type fits your situation and which institution charges the lowest fees.

Key Takeaways

You can open an IRA at a bank, brokerage, credit union, or robo-advisor; the process takes 15 minutes to an hour and requires only your Social Security number, income information, and a funding method.
Traditional IRAs let you deduct contributions now if your income is below a certain threshold, but Roth IRAs let you withdraw money tax-free in retirement and have no income limits for contributions.
You must have earned income in the year you contribute, and contribution limits are the same for everyone — currently $7,000 per year if you are under 50, or $8,000 if you are 50 or older.
After opening the account, you choose how to invest the money — in stocks, bonds, mutual funds, or target-date funds — and this choice matters far more than which institution you pick.
If you already have a workplace retirement plan like a 401(k), a Traditional IRA deduction may be limited or unavailable depending on your income.

Step 1: Decide between Traditional and Roth

A Traditional IRA lets you deduct your contribution from your taxable income in the year you make it, which lowers your tax bill now. You pay taxes on the money when you withdraw it in retirement. This works best if you expect to be in a lower tax bracket in retirement, or if you want to reduce your taxable income this year.

A Roth IRA takes money after taxes — you do not get a deduction now — but all withdrawals in retirement are tax-free. This works best if you expect to be in a higher tax bracket later, or if you want tax-free growth over decades. Roth IRAs also have no required withdrawals at any age, and you can withdraw your contributions (not earnings) at any time without penalty.

If you have a workplace 401(k) or similar plan, your ability to deduct a Traditional IRA contribution phases out at higher incomes. The income thresholds change each year. Roth IRAs also have income limits for contributions, but they are higher and phase out more gradually. Check the current year's limits on the IRS website or ask your chosen institution before you open the account.

Step 2: Choose where to open your account

You can open an IRA at a bank (which typically offers only low-interest savings IRAs), a brokerage like Fidelity or Schwab (which offers stocks, bonds, and mutual funds), a credit union, or a robo-advisor like Betterment or Vanguard Personal Advisor Services. The institution does not matter as much as the fees and the investment options available to you.

Compare the annual account fee (many charge zero), the cost of the investments you plan to buy (measured as an expense ratio for mutual funds and ETFs), and whether the institution charges a fee to buy or sell individual stocks. If you plan to invest in low-cost index funds, any major brokerage will work. If you want personalized advice, a robo-advisor or a full-service firm may charge more but will manage the account for you.

You do not need to open your IRA where you have a checking account. Many people open IRAs at a brokerage separate from their bank because brokerages offer more investment choices and often lower fees.

Step 3: Complete the paperwork and provide identification

Whether you open your account online, by phone, or in person, you will need to provide your full legal name, date of birth, Social Security number, and current address. You will also answer questions about your employment status, income, and whether you have other retirement accounts. These questions help the institution verify your identity and report the account to the IRS.

If you open the account online, you may be asked to upload a photo of your driver's license or passport. If you open it in person, bring a government-issued ID. Some institutions ask for a second form of ID or a recent utility bill to confirm your address. The process is the same as opening a checking account.

You will also choose whether the account is in your name alone or, if you are married, whether it is a spousal IRA (which lets your non-working spouse open an IRA if you have earned income). Most people open accounts in their own name.

Step 4: Fund your account

After the account is open, you can deposit money by linking a bank account, transferring funds electronically, mailing a check, or in some cases depositing cash at a branch. The institution will provide instructions for each method. Most online transfers take one to three business days to clear.

You can contribute up to $7,000 per year if you are under 50, or $8,000 if you are 50 or older (these limits are for 2024 and may change). You must have earned income equal to or greater than the amount you contribute — you cannot contribute $7,000 if you earned only $3,000 that year. You can contribute at any time during the year or up until the tax filing deadline the following year (usually April 15).

If you are moving money from another IRA or a workplace retirement plan, you can do a direct transfer or rollover instead of depositing new money. A direct transfer goes straight from one institution to another and avoids taxes and penalties. A rollover means the money goes to you first, and you have 60 days to deposit it in the new IRA; if you miss the deadline, it counts as a withdrawal and you owe taxes and penalties.

Step 5: Choose your investments

After the money is in your account, you must decide how to invest it. You can buy individual stocks, bonds, mutual funds, exchange-traded funds (ETFs), or target-date funds. If you do nothing, some institutions will hold the money in cash or a money market fund, which earns very little.

For most people, a target-date fund is the simplest choice. These funds automatically shift from stocks to bonds as you approach retirement, and you choose one based on your expected retirement year (for example, a 2050 target-date fund if you plan to retire around 2050). The fund does the rebalancing for you.

If you want more control, you can build a simple portfolio of two or three low-cost index funds — for example, a U.S. stock index fund, an international stock index fund, and a bond index fund — and decide what percentage of your money goes into each. This choice matters far more than which institution you chose; a difference of 0.5% in annual fees or investment returns compounds to tens of thousands of dollars over decades.

What happens after you open your IRA

Once your account is open and invested, you do not need to do anything unless you want to add more money, change your investments, or take a withdrawal. You will receive statements from the institution showing your balance and any transactions. The institution will also send you tax forms each year if you make a withdrawal or convert a Traditional IRA to a Roth.

You can contribute to your IRA every year as long as you have earned income, even if you have a workplace retirement plan. However, if you have a 401(k) or similar plan, your ability to deduct Traditional IRA contributions may be limited. Roth contributions have no limit based on other retirement accounts, only based on your income.

If you change jobs or want to move your IRA to a different institution, you can do a direct transfer at any time. There is no limit on how many transfers you can do, though some institutions may charge a fee to transfer out.

Frequently Asked Questions

Can I open an IRA if I am self-employed or a freelancer?

Yes. You can open a regular IRA as long as you have earned income from your work. If you are self-employed, you may also want to look at a SEP IRA or Solo 401(k), which allow much higher contributions. A regular IRA works fine if your self-employment income is modest.

What if I do not have a Social Security number?

You need a Social Security number or an Individual Taxpayer Identification Number (ITIN) to open an IRA. If you are not a U.S. citizen, you can still open an IRA with an ITIN, but you will need to provide additional documentation to the institution.

Can I open an IRA for my child?

Yes, if your child has earned income from work (a job, self-employment, or modeling, for example). The contribution limit is the same as for adults — up to $7,000 per year — but cannot exceed the child's earned income that year. A custodial IRA is opened in the child's name with a parent or guardian as custodian.

How long does it take to open an IRA?

Online, most institutions can open an account in 15 minutes to an hour. In person at a bank or branch, it may take 30 minutes to an hour. The money you deposit may take one to three business days to clear and be available to invest.

What if I already have an IRA somewhere else?

You can open a second IRA at a different institution. Your total contributions across all IRAs cannot exceed the annual limit ($7,000 or $8,000), but you can split that amount between multiple accounts. You can also transfer money from one IRA to another without penalty using a direct transfer.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.