How to open an IRA account

Opening an IRA account takes about 15 minutes online or in person, and you can start with as little as $1 at most banks and brokerages. You will need a Social Security number, a valid ID, and proof of address (a recent utility bill or bank statement works). The actual steps depend on which type of IRA you want — Traditional or Roth — and where you open it, but the process is the same everywhere: choose your institution, fill out a form with your personal information, link a bank account to fund it, and decide how your money will be invested.

The hardest part is not the paperwork. It is deciding where to open the account and what to invest in once it is open. This guide walks you through both.

Key Takeaways

  • You can open an IRA at a bank, credit union, or brokerage, and the choice affects what investments are available to you and how much you pay in fees.
  • A Traditional IRA lets you deduct contributions from your taxes now, while a Roth IRA taxes you now but lets withdrawals be tax-free later — which one makes sense depends on your current income.
  • You will need your Social Security number, a valid ID, and proof of address, plus a bank account to fund the IRA from.
  • Most institutions let you open an account online in 15 minutes, but you should understand what you will invest in before you start the process.
  • The annual contribution limit is the same for both types of IRA, and it changes each year — you cannot put in unlimited money.

Where to open an IRA: banks, credit unions, and brokerages

Your choice of institution shapes what you can invest in and how much you will pay. A bank typically offers IRAs that hold savings accounts, CDs (certificates of deposit), or money market accounts — these are safe and straightforward, but the returns are low. A credit union works the same way. A brokerage — a company like Fidelity, Vanguard, or Charles Schwab — lets you invest in stocks, bonds, mutual funds, and exchange-traded funds (ETFs), which have higher growth potential but also higher risk.

If you are new to investing and want to keep things straightforward and safe, start at your bank or credit union. If you want to build wealth over time and are willing to learn about investing, a brokerage is the better choice. Many brokerages now offer low or zero account minimums and low fees, so cost is not a barrier anymore.

You can also open an IRA through your employer if they offer one — this is called a SEP IRA or Solo 401(k) if you are self-employed. Ask your HR department or accountant whether this is an option for you.

Traditional IRA vs. Roth IRA: which one to choose

The difference between these two comes down to when you pay taxes. With a Traditional IRA, you contribute money before taxes are taken out, which lowers your taxable income this year. You pay taxes later when you withdraw the money in retirement. With a Roth IRA, you contribute money that has already been taxed, so you do not get a tax break now — but when you withdraw money in retirement, you owe no taxes at all.

Choose a Traditional IRA if your income is high right now and you expect it to be lower in retirement. Choose a Roth IRA if your income is low or moderate now and you expect it to be higher later, or if you straightforward want to avoid taxes in retirement. If you are unsure, a Roth is usually the safer choice for people early in their careers, because you lock in today's tax rate instead of guessing what rates will be decades from now.

There is one important limit: you can only contribute to a Roth IRA if your income is below a certain threshold. That threshold changes every year and depends on whether you are single or married. Check the IRS website or ask your bank or brokerage whether you are may be able to access before you open one.

What documents and information you will need

Have these items ready before you start your process:

  • Your Social Security number
  • A valid photo ID (driver's license, passport, or state ID)
  • Proof of your current address — a recent utility bill, lease, mortgage statement, or bank statement dated within the last 60 days
  • The routing number and account number from a checking or savings account you want to link to the IRA
  • Your employment information (employer name and your job title)

If you are opening the account online, you may be able to upload photos of your ID and address proof instead of mailing them in. If you are opening in person at a bank or credit union branch, bring the originals.

The process process: online vs. in person

Most banks and brokerages let you open an IRA entirely online. You will fill out a form with your name, address, Social Security number, and employment information. You will choose whether you want a Traditional or Roth IRA. You will upload or photograph your ID and proof of address. Then you will link a bank account so the institution can pull money from it to fund the IRA.

The whole process usually takes 10 to 20 minutes. Once you submit, the institution will review your information — this typically takes one to three business days. You will get an email or letter confirming that your account is open.

If you prefer to do this in person, visit a branch of your bank, credit union, or brokerage. Bring your ID, proof of address, and the routing and account numbers from the bank account you want to link. A representative will fill out the form with you and answer questions. You will still need to fund the account from your linked bank account afterward.

Funding your IRA and choosing investments

Once your account is open, you need to put money into it. You can do this by linking your bank account and transferring money online, or by mailing a check. Most institutions let you set up automatic transfers — for example, $100 per month — so you do not have to remember to fund it yourself.

The next step is deciding what to invest in. If you opened your IRA at a bank, your money will likely go into a savings account or CD automatically — you do not have to do anything. If you opened it at a brokerage, you will need to choose. This is where many people get stuck, because there are thousands of options.

If you are new to investing, start with a target-date fund. You pick the year you plan to retire, and the fund automatically adjusts its mix of stocks and bonds as you get closer to that date. This requires almost no knowledge on your part. If you want something even simpler, ask about a robo-advisor — a service that builds and manages a portfolio for you based on your age and risk tolerance, usually for a small fee.

Annual contribution limits and important date

You cannot put unlimited money into an IRA. The IRS sets an annual limit on how much you can contribute to all your IRAs combined — whether you have one IRA or five, the limit applies to the total. This limit changes every year. For 2024, the limit is $7,000 if you are under 50, and $8,000 if you are 50 or older (the extra $1,000 is called a "catch-up contribution").

You can contribute for a given year until the tax filing important date the following year — usually April 15. For example, you can contribute to your 2024 IRA until April 15, 2025. This gives you extra time if you want to wait until tax season to fund it.

If you earn less than the contribution limit, you can only contribute up to what you earned that year. For example, if you earned $4,000 in 2024, you can only put $4,000 into an IRA for 2024, even though the limit is $7,000.

What happens after your account is open

Once your IRA is funded and invested, you do not need to do much. Your money will grow over time. You will receive statements from your institution showing your balance and how your investments are performing — usually quarterly or monthly.

You can add more money to your IRA whenever you want, as long as you stay within the annual limit. You can also change your investments if you want, though most people benefit from leaving them alone and letting them grow.

Do not withdraw money from your IRA before age 59½ unless you have a very good reason — the IRS will charge you a 10% penalty on top of income taxes. There are a few exceptions, like a first-time home purchase or a financial hardship, but they are narrow. The whole point of an IRA is to lock money away for retirement.

Frequently Asked Questions

Can I open an IRA if I do not have a job?

You need earned income to contribute to an IRA — money from a job, self-employment, or a side business. You cannot contribute if your only income is from investments, Social Security, or unemployment benefits. If you are self-employed, you can open a Solo 401(k) or SEP IRA instead, which have higher contribution limits.

What if I already have a retirement account at work?

You can have both a workplace retirement account (like a 401(k)) and an IRA at the same time. However, if your income is high and you have a workplace plan, you may not be able to deduct Traditional IRA contributions from your taxes. A Roth IRA has income limits too. Check with a tax professional or your brokerage to understand how having both affects you.

Can I move money from one IRA to another?

Yes. You can transfer money from one IRA to another without penalty, as long as you do it correctly. Ask your new institution to do a "direct transfer" — they will contact your old institution and move the money directly. If you withdraw the money yourself, you have 60 days to deposit it in a new IRA, or the IRS treats it as a withdrawal and charges you taxes and penalties.

What if I make a mistake on my process?

Contact your bank or brokerage right away. Most mistakes can be fixed before your account is fully set up. If you funded the account with the wrong information, you may be able to correct it or close the account and open a new one. The sooner you catch it, the easier it is to fix.

Do I need to report my IRA on my taxes?

You do not file paperwork to open an IRA, but you do report contributions and withdrawals on your tax return. If you contribute to a Traditional IRA, you may be able to deduct it. If you withdraw money, you report that too. Your bank or brokerage will send you a form (Form 5498 or 1099-R) each year with the information you need for your taxes.