How To Open A Roth Ira

Penulis Alaric Monday, May 09, 2022 Post a Comment

So you're interested in opening a Roth IRA? Great choice! A Roth IRA is an excellent way to save for your future and potentially save on taxes. But where do you begin? Here are some helpful tips and step-by-step instructions for opening a Roth IRA through Fidelity.

Step 1: Understand the Basics

Before you begin, it's important to understand exactly what a Roth IRA is. Simply put, a Roth IRA is a retirement account that allows your money to grow tax-free. That means you won't owe taxes on any of the money you earn through investments within your Roth IRA - both capital gains and dividends. Additionally, Roth IRA contributions are made with after-tax dollars, which means you pay taxes on the money upfront. But when you withdraw that money in retirement, it's tax-free!

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It's important to note that Roth IRA contributions are limited and can depend on income and other factors. For 2021, the contribution limit is $6,000 for those under 50 years old, and $7,000 for those 50 and older.

Step 2: Check Your Eligibility

Not everyone is eligible to contribute to a Roth IRA. There are income limits and other restrictions. For 2021, single filers with a modified adjusted gross income of $140,000 or more and married couples filing jointly with a combined modified adjusted gross income of $208,000 or more are not eligible to contribute to a Roth IRA. However, there are ways around these income limits, such as the "backdoor" method.

Step 3: Open an Account

Now that you understand the basics and have checked your eligibility, it's time to open an account. If you already have a Fidelity account, you can easily open a Roth IRA through your account dashboard. If not, you'll need to create a new account. Fidelity offers a variety of Roth IRA options, including traditional brokerage accounts and managed accounts. Choose the one that best fits your investment goals and risk tolerance.

Step 4: Make Your Contributions

Once your account is open, you can begin making contributions. You can make contributions through automatic transfers from your bank account or by manually transferring money into your Roth IRA. Fidelity also offers a "robo-advisor" option, which uses computer algorithms to create a custom investment portfolio for you based on your goals and risk tolerance.

Step 5: Choose Your Investments

Now that you have money in your Roth IRA, it's time to choose your investments. Fidelity offers a wide range of investment options, including mutual funds, exchange-traded funds (ETFs), individual stocks, and bonds. It's important to choose investments that align with your goals and risk tolerance. Remember, the goal is to make your money grow tax-free over time!

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Step 6: Monitor Your Account

Finally, it's important to regularly monitor your Roth IRA account. Check your investment returns and adjust your investments as needed to stay on track with your goals. It's also important to keep an eye on any fees associated with your account to ensure you're not paying more than you need to.

Opening a Roth IRA through Fidelity is a great way to start saving for your future and potentially save on taxes. Follow these steps and start making your contributions today!

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