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How to Open a Roth IRA

You have been listening to the Stewardology Podcast and you know that saving and investing for the future matters. You have heard about the power of compound interest and want it working for you, but you are not sure where to begin. Who do you ask? What questions should you be asking? The process feels overwhelming, so you never start.

In this episode, we walk through exactly how to get started with investing by opening a Roth IRA and building a plan with clarity and confidence.

 

Step One: Are You Ready to Invest?

Before you invest, it is important to make sure investing is actually your next best step. As a general rule, you should have a basic financial foundation in place before moving into long term investing.

Ask yourself if there are higher priorities than investing right now:

  • Have a budget and know where your money is going
  • Give regularly and consistently
  • Have an emergency fund so short term needs are covered before long term investing
  • Have a plan to get out of debt

If these areas are in place or well underway, you are ready to start investing.

 

Step Two: Start With Your Employer Retirement Plan

If you are employed and your employer offers a retirement plan, begin there. If a Roth option is available within your employer plan such as a Roth 401k, that is often the best place to start. Your employer will guide you through opening and funding the account.

If your employer offers a matching contribution, take full advantage of it. That is free money you do not want to leave on the table.

For 2026, the 401k contribution limit is $24,500 per person.

 

Step Three: Open a Roth IRA

If your employer does not offer a retirement plan, or if you are already contributing enough to receive the full employer match and still have money left to invest, opening a Roth IRA is a wise next step.

 

 

Working With an Advisor or Doing It Yourself

Many people prefer working with a financial advisor because they do not feel confident choosing investments on their own. Others feel comfortable managing their own accounts and prefer not to pay for advice.

We generally encourage working with a financial advisor if you are able. However, we recognize that many people just starting out may not meet advisor minimums. If you can work with an advisor, follow their guidance. If not, here is how to open and manage a Roth IRA on your own.

 

Choosing an Investment Company

There are many reputable companies that allow you to open a Roth IRA, including:

  • Vanguard
  • Fidelity
  • Charles Schwab
  • Robinhood

There are other options as well. Ask trusted family members or friends who they use, and be cautious of offers that sound too good to be true. These firms are well established and widely trusted.

Once you choose a company, go to their website and select the option to open an account. When asked what type of account you want, choose Roth IRA.

 

Roth IRA Eligibility Requirements

Before opening a Roth IRA, you should understand the basic eligibility rules:

  • You must have earned income from wages or self employment
  • There are income limits for Roth IRA contributions
  • For 2026, income limits are $153,000 for single filers and $242,000 for married filers
  • There is no income limit for Roth 401k contributions

The application process usually takes five to ten minutes. You will be asked for:

  • Social Security number
  • Date of birth
  • Legal name and address
  • Employer information
  • Bank routing and account numbers

Be sure to save your username and password.

 

Funding the Account

Funding is typically done through an electronic transfer from your checking or savings account.

For 2026, Roth IRA contribution limits are:

  • $7,500 per person under age 50
  • $8,600 per person age 50 and older

To max out contributions if you are under 50, that equals $625 per month. For those over 50, the monthly amount is approximately $716.

You cannot contribute more than your earned income for the year. However, if you are married, joint earned income can allow a non working spouse to contribute up to the maximum.

 

Choosing Your Investments

This is often the most intimidating part of the process. Many people worry about choosing the wrong investment.

Certain assets are generally not a good fit inside a Roth IRA, including cash, money markets, precious metals, or direct real estate holdings.

A simple and effective option for many investors is a target date retirement fund. These funds automatically adjust risk as you approach retirement and are designed to be set it and forget it solutions.

To choose a target date fund, select the year closest to when you expect to retire, such as age 65 or 70. The fund gradually shifts from stocks toward bonds as that date approaches.

Other options include target risk funds, index funds, growth oriented mutual funds, or exchange traded funds. Investing in individual stocks is generally not wise for novice investors who do not closely follow companies and markets.

 

Managing Your Roth IRA Over Time

  1. Set up automatic contributions monthly, quarterly, or annually
  2. Review your account and investments at least once per year
  3. Rebalance the portfolio as it grows
  4. Monitor income annually to ensure you remain eligible
  5. Increase contributions over time with the goal of maxing out

Do not panic during market downturns. Market declines often present opportunities to invest at lower prices if you are able.

Avoid early withdrawals whenever possible. The power of compounding works best when left uninterrupted.

 

Roth IRA Withdrawal Rules

  • You can always withdraw your original contributions tax and penalty free
  • Once you reach age 59 and a half and the account has been open at least five years, both contributions and growth can be withdrawn tax free
  • Early withdrawals of growth may be subject to taxes and penalties, though certain exceptions exist
  • Common exceptions include first time home purchases, qualified education expenses, birth or adoption of a child, disability, death, certain medical expenses, or health insurance premiums after extended unemployment.

 

Why Open a Roth IRA?

  • Roth IRA contributions are made with after tax dollars, but growth is tax free
  • There are no required minimum distributions during your lifetime
  • Tax free growth can provide significant flexibility and benefits in retirement
  • Inherited Roth IRAs must be distributed within ten years, but withdrawals remain tax free

 

 

 

 

Next Steps

 

Material presented is property of The Stewardology Podcast, a ministry of Life Financial Group and Life Institute. You may not copy, reproduce, modify, create derivative works, or exploit any content without the expressed written permission of The Stewardology Podcast. For more information, contact us at Contact@StewardologyPodcast.com or (800) 688-5800.

The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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