When you contribute to a Roth IRA, you’re contributing money that has already been taxed as income. Then, your money grows tax-free and you pay no tax when you withdraw the money in retirement. Here, you’ll learn how a Roth IRA differs from a traditional IRA and how much money you need to open a Roth IRA account. You’ll also learn how to save for retirement and how to fund a Roth IRA.
How Much Income Do I Need To Open a Roth IRA?
The IRS does not require that you contribute money in order to open a Roth IRA , however some brokerages may have their own minimum requirement for investment. You usually open a Roth IRA with a brokerage account, and each brokerage account has its own rules for their minimum investment requirements. For example, Vanguard requires $1,000 to $3,000 to open a retirement account, while Fidelity and Charles Schwab don’t have a minimum investment requirement. Make sure you can buy the type of assets that you want through the brokerage you choose to open your Roth IRA. Make sure you fully understand the terms of the account.
Minimum Deposit Requirements for a Roth IRA
The IRS has no minimum deposit requirements. You can put as little money as you want into a Roth IRA with many brokerages. Each brokerage firm has its own minimum deposit requirements. Generally, when you have a higher minimum deposit requirement, you also get access to more personalized services like guidance from professional advisors.
Basic Level
Many investment companies like Fidelity and Charles Schwab will allow you to open a Roth IRA with no minimum investment requirement. You’ll manage the investments on your own. These brokerages often provide online planning tools or education materials, but not personalized advice.
Some Professional Advising
Some brokerages offer additional services, but require a higher minimum deposit. For example, Merrill’s Guided Investing requires a $1,000 account minimum and charges a 0.45% annual fee. With this account, you can access an investment advisory platform aligned to your goals.
Advanced Personal Planning and Advice
You can often find more customized investing advice with accounts with higher minimum deposits. If you’ve been saving through your Roth IRA for years, you may have enough money to meet the deposit requirement for these services, which can range from about $20,000 to $25,000. You’ll typically face an advisory fee with these accounts, which is an annual fee that is a percentage of your invested assets. For example, Merrill advisory fee for an advisor with its Guided Investing Account is 0.85%, while Fidelity charges 0.5% per year for Fidelity Personalized Planning & Advice Roth IRA.
How To Save Up for Roth IRA Contributions
Determining how much you’ll contribute to an IRA will depend on a number of aspects about your personal financial situation and goals. For example, you may want to consider first contributing to a 401(k) before an IRA if your employer provides matching contributions. Or you may first want to pay off high-interest debt. You can work to increase your contributions by creating a budget that allots a specific amount of your monthly income toward your retirement goals. Over time, even small deposits add up. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
