Updated: May 5, 2020
So you've made the important decision to open a Roth IRA account, but now you're not sure how to do it. Well it's actually pretty easy and only takes about 15 minutes.
Check out our full list and analysis of Roth IRA accounts here.
If you are under the age of 18 you can still invest in your Roth IRA, but it must be through a custodial/joint Roth IRA. Fortunately, signing up for these is just as easy as signing up when you're over 18. When looking for custodial/join Roth IRAs, not all banks/roboadvisors offer them, make sure that you talk with your parents about where to sign up.
When you are under 18, you have access to a parent match plan for investing. You can only invest up to $6,000 a year, but if you are investing $2,000, your parents can match your contribution for a total of $4,000 invested.
Things to Note:
The process is fairly simple, but here are some important things to take note of:
- There is a limit to investing: The maximum contribution to a Roth IRA is $6,000 per year. If you are 50 or older, the limit is $7,000.
- Investment must be earned income: When you invest in your Roth IRA, your investment must come from wages, salaries, commissions, bonuses, self-employment, freelance, and contract work. If you have earned $10,000 in a year, you are allowed to make your full $6,000 contribution. If you earned $4,000, that is the limit to your investment.
- Know what you are investing in: One of the most common mistakes that investors make with their Roth IRAs is holding through their banks and credit unions. Because you likely have decades to invest, it's important to add in high risk/high reward stocks that end up averaging out over time. Jumpstart recommends investing in Index dunds and ETFs (Exchange Traded Funds).
A Roth IRA account is one of best investments for your retirement, and the earlier you start, the more you will earn over time, tax free. Take a look at our favorite Index Funds/ETFs.