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How to Open a Roth IRA

A Roth is basically an investment account (you'll still have to choose investments, and we'll get to that) with tax advantages: You invest post-tax money in a Roth, and you can't take out any of the earnings until you're 59-1/2, but when you do, you won't pay taxes on your withdrawals.Provided by

Hands-on time: 50 minutes
Total time: 1 to 7 business days, depending on how long it takes to process an electronic deposit or a check

This is for you: Roth IRAs aren't available to everyone. You qualify if you file your taxes as a single person with a modified adjusted gross income (AGI) less than $120,000, or if you file jointly as a married couple, with joint income less than $177,000. Not sure? Here's how to figure it out, or how to find your AGI from last year. If you make more than that, you'll want to max out your contributions to a 401(k) plan instead. (We could talk about converting a nondeductible IRA to a Roth, but there are tax implications, and that's another article.)

Cost: Most financial institutions require a minimum investment (of $1,000, say), although some will waive it if you set up automatic monthly deposits of $50-$200. Contributions are capped at $5,000 per tax year, per person, unless you're 50 or older (in which case it's $6,000).
What you'll need:
• Your social security number.

• Your driver's license.

• A secure, Internet-connected computer.

• Your employer's name and address (if you're employed).

• Names, SSNs and birthdates for anyone you want to designate as a beneficiary.

• Possibly a printer (if forms need to be printed and signed, in which case, also paper and an envelope).

• Either a checkbook or a check (with your bank account number and routing number). If you know your account number and routing number without looking at a check (and you're planning on sending an electronic deposit), that's fine.

• A statement from your brokerage account if you plan to transfer assets over. (Don't have a brokerage account? Don't worry about it.)

What to do:
• Pick a financial institution. Many people choose a discount brokerage house, such as Fidelity or Schwab, or a low-cost fund company like Vanguard or T. Rowe Price (Okay, Fidelity is kind of both). Not sure how to choose? We'll get to that tomorrow.
• Open an account.
• At T. Rowe Price (or get someone on the phone)

• At Vanguard (or get someone on the phone)

• At Fidelity (or get someone on the phone)

• At Schwab (or get someone on the phone)

• Follow the prompts and enter your information as needed.
Choose beneficiaries for your account. (Don't skip this. It's important.)
• Decide how you want to fund the account. Electronic transfer from your bank? Send a check? Wire funds? "Fund it later," is sometimes an option, but we don't recommend that. If you're going to open a Roth, put some cash in it.
Choose investments, if you're ready to do so. If you aren't, you probably have the option of sticking cash in a house money market account until you're ready.
• Click "Submit" or whatever button is required to close the deal, or print out your documents, sign them, and mail them.

Read more from Bundle bundle.com:
Choosing Between a 401(k), Traditional, and Roth IRA (LearnVest)
Roth IRA Calculator (Bankrate)
Nestpert: Jay Hutchins, a financial planner in Lebanon, N.H.

-- Bundle.com

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