Back To Basics: How To Set Up An IRA

Opening an Individual Retirement Account (IRA) is one of the simplest ways to start building long-term financial security, or so you may have heard. If you're like many Americans, you likely were not taught about IRAs in school, and may not know where to start. The good news is that opening an IRA is easier than it sounds and, while you can always enlist the help of a qualified financial advisor, anyone can set up a new account on their own by following a few basic steps.

Before you start the setup process, you'll need to understand what exactly an IRA is. IRAs are tax-advantaged investment accounts that allow you to save for retirement. They are notable for the fact that you don't need an employer to open one, unlike many 401(k) accounts. With that said, you can still open an IRA even if you already have a 401(k) or 403(b) through your employer. In fact, having an IRA can make it easier to consolidate your retirement funds — especially if you eventually change employers or suddenly lose your job — because you can roll other retirement accounts over into your IRA. 

Next, you'll need to decide what kind of IRA account you want. The most common IRA options that you've likely heard about are the traditional IRA and the Roth IRA, and while the contribution limit for each is $7,500 annually (or up to your taxable income for the year, if less), bumped to $8,600 after age 50, as of 2026, each has its own unique tax benefits and eligibility requirements. 

Neither the traditional or Roth IRA have age limits in order to open accounts, but your allowable contribution amounts do increase after age 50. A traditional IRA allows you to contribute pre-tax dollars into the account, which can potentially lower your taxable income for the years in which you contribute funds. As such, your investments grow in the account tax-deferred — meaning you won't pay any taxes on gains until you start withdrawing your money in retirement. Withdrawal before age 59 1/2 will result in penalties, and after age 73 you must take out what are known as Required Minimum Distributions (RMDs) – but it's easier than you think to calculate your RMDs.

A Roth IRA can be a good choice if you expect to be in a higher income bracket later on in life. With this account type, there aren't any RMDs and contributions are made with after-tax dollars. This means you won't be able to enjoy any immediate tax deductions, but that your withdrawals in retirement will be tax-free. Just like the traditional IRA, you will incur penalties if you withdraw before age 59 1/2 , or if you withdraw before you've had your Roth IRA for at least five years). Anyone with earned income below the IRS' limits ($153,000 for single filers or $242,000 if filing jointly, as of 2026) can set up a Roth IRA. After that, limitations apply.

Once you've decided which type of IRA best fits your goals, you'll need to choose where to open the account. Banks, credit unions, brokerage firms, and online investment platforms all offer IRAs, and choosing one will depend on how hands-on you want to be with the account, and your comfort level with each. Be sure to pay attention to things like potential account fees, investment options, minimum balance requirements, and even available educational resources so you can stay on top of any changes to your retirement plans and be in tune with your account's performance over time.

The good news is that, after deciding where you'd like to open your IRA, the rest is pretty straightforward. Once your account is approved, you'll need to add money. You can do this by making a one-time contribution or by setting up automatic deposits from an existing checking or savings account. Of course, if you've experienced a recent change (like leaving a job), you can also roll over an existing 401(k) account to get your IRA started.

Keep in mind that opening an IRA is only the first step in a long process of saving for retirement. It's vital to review your account periodically to ensure your investment strategy aligns with your goals and risk tolerance. You'll also want to make sure your future self gets the most out of your account by contributing regularly. After all, the whole point of having an IRA is to add financial security to your golden years.