How (And Where) to Open Your First IRA


In our last post we discussed how opening a Roth IRA is the best way to save for financial independence if you don’t have a 401(k) through your employment. But how do you actually open one? 

Most millennials understand how to open a bank account but don’t quite know how to buy shares in the stock market. If this describes you, then you definitely have enough knowledge to open an IRA because the process is kind of halfway between the two. 

So Where Do You Go?

Like a bank account, you can just walk into pretty much any bank and ask to open an IRA. But you can also walk into what’s called a brokerage firm (or find one online). These are financial institutions that are kind of like riskier banks—simply put, you bring them your money, they invest it on your behalf in stock and/or bonds, and hopefully the market is strong and your money grows a lot more quickly than it would in the bank.

Risk Versus Reward

So here’s the thing: as in all investments, the more you risk, the more you stand to gain—or lose. Opening an IRA with a bank is “safer” than going with a brokerage firm because banks offer Certificates of Deposit (CDs) that are protected by the FDIC for up to $250,000 if the bank fails. If you’re worried about the economy collapsing, make sure you’re getting a CD from a bank for your IRA.

If you’re not worried about a financial apocalypse, though—and you really shouldn’t be—you’re better off investing with a brokerage firm when you’re young. After you’re in your forties or fifties it would be wise to move your investments to something safer, but now is the time to take risks that will pay off.

Of course, a Roth IRA isn’t like gambling on the stock market. Even though your money is invested in the market, it’s invested in a number of different stable stocks to prevent any kind of all-or-nothing crash. To be even safer, you can invest in mutual fund families—a type of brokerage—that give you less control over your exact investment choices but an even more stable and diversified portfolio.

What You Need

Not much! Like we just said, opening your IRA is almost as easy as opening a bank account—that is, after you’ve made your decision as to whether you’ll go with a brokerage, mutual fund family, or bank, and which company particular sounds like the best fit. After you know where you’re going, all you need is:

  • Social Security Number
  • Bank Account Information
  • Employment Information
  • The minimum initial deposit amount (this can be anywhere from nothing to thousands of dollars, so pick something that works with your budget)

A Roth IRA might be the cornerstone of your future. Sit down and make a financial plan with the help of our easy and quick e-books to learn more about how to manage your retirement, savings, and investments—for more about IRAs, we recommend either our 59 Minute Retirement Plan or our 59 Minutes to Profitable Investing. 

E. Scott Erickson’s vision is to empower Americans through financial education. For the last 30 years, he has been a successful financial advisor and avid public speaker in the Pacific Northwest.

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