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What is a Roth IRA?

A Roth IRA, or an Individual Retirement Account, is a great brokerage account to start with. Typically these account work just like your standard Brokerage account and you can invest in it very simularly. Also, these accounts are able to be opened art pretty much any age. The best part about them is that when you take the money out at retirement, its all tax free. 

Intro to Roth IRAs

Intro to Roth IRAs

Restrictions for Roth IRA

Minimum Income

The amount you put in your brokerage account in one year must be less than your earned income in that given year. For most people, this seems very easy and almost impossible for people to even do, but for children that have saved money over time and want to place it into a Roth IRA, It must be less than their income. 

Maximum Contributions

The maximum amount you can put into your account is $6,000 if you are under 50. If you are above age 50, you can put up to $7,000. *This is as of 2022. In 2023, it will be $6,500 for people under 50 and $7,500 for people over the age of 50. This changes year to year and will likely become larger due to inflation and interest rates.

Maximum Income

There is a maximum amount of money you can make from your outside job in which you will not be allowed to put money into your Roth IRA. If you make more than $144,000 in a year, in 2022, you can not put any money into your Roth IRA. *For 2023, it will be changed to $153,000 per year. This does not mean that your account will cease to exist, but it means that you will no longer be able to contribute money to it. That's why starting as young as possible is the best thing you can do. 

How do I get started?

  1. Determine your eligibility: To open a Roth IRA, you need to meet certain criteria. You must have earned income (such as wages, salary, or self-employment income), and your income must fall within the limits set by the IRS. The limits change each year, so make sure to check the current limits.

  2. Choose a financial institution: Look for a reputable financial institution that offers Roth IRAs. Options include banks, credit unions, brokerage firms, and online investment platforms. Compare their fees, investment options, customer service, and any additional features they may offer.

  3. Gather necessary information: You'll need to provide personal information, including your Social Security number, date of birth, and contact information. Be prepared to provide identification documents to comply with anti-money laundering regulations.

  4. Complete the application: Fill out the application form provided by the financial institution you've chosen. This may be done online or through paper forms, depending on the institution. Read the terms and conditions carefully before submitting your application.

  5. Fund your Roth IRA: Decide how much money you want to contribute to your Roth IRA. The maximum contribution limits are set by the IRS each year, so make sure you are within those limits. You can contribute cash or transfer funds from another retirement account (e.g., a traditional IRA or a 401(k)) into your Roth IRA.

  6. Select your investments: Once your Roth IRA is funded, you need to choose how you want to invest the money within the account. Most financial institutions offer a range of investment options, such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Consider your risk tolerance, time horizon, and investment goals when making your selections.

  7. Review and manage your Roth IRA: Regularly review your Roth IRA and make adjustments as needed. Monitor your investments' performance and rebalance your portfolio if necessary. Keep track of any tax forms or documentation provided by your financial institution for tax reporting purposes.

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Roth IRA Requirements

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