IRA 101

Retirement made simple

Become an IRA master in just 5 minutes. Learn: 1) what an IRA is, 2) how and when

to start one, 3) how to get the most out of it when you do.

What is an IRA?

An Individual Retirement Account, or IRA, is a retirement account that can be opened by anyone. Unlike a 401k, an IRA isn’t connected to your employer.

How much money do I need to start an IRA?

How much money you need to open one depends on which company you use. Each has their own minimum, ranging from $500 to $3,000.

How often can I contribute to my IRA?

You can add money to your IRA as often or as little as you want. Some people contribute to their IRA every month, while others do it once a year. The only limit is an annual $5,500 contribution or 100% of your salary - whichever is smaller.

What are the benefits to an IRA?

An IRA provides tax incentives, like a yearly deduction on your contributions. With a Roth IRA, you can withdraw money tax-free once you’re a certain age.

How often should I check my IRA?

You can check your IRA as often as you like, but some prefer to just check every three months or so. If you want, you can hire a financial advisor to show you which funds to invest in and tell you if your IRA is growing.

When should I start an IRA?

You can start an IRA, anytime as long as you use money you got from work. The earlier you start, the more time you’ll have to build wealth.

Remember, there’s a $5,500 limit (or $6,500 if you’re 50 or older) on how much you can put in your IRA every year.

Why is there a limit?

The government limits IRA contributions because an IRA has special tax benefits. The limit prevents people from not paying taxes on all of their investments.

How do I choose a financial institution for my IRA?

When picking a firm for your IRA, look at how much they’ll charge to maintain it. High fees can cripple your investments. A good rule of thumb? Stick to 1% total fees or less.

You should also check the average rate of return when picking a fund for your IRA. The saying goes, past returns are not indicative of future performance. Still, they’re a good barometer to use.

What’s a rollover IRA?

A rollover IRA is when you move an employer-based retirement plan, like a 401k, into a new or current IRA account.

Why would I need one?

When you leave a job, you might be able to keep your 401k at your former employer’s financial institution. However, some companies charge an extra fee if you do that or require that you move your plan when you don’t work there.

Why should I rollover my retirement plan into an IRA?

You could cash out your 401k, but that would result in hefty fees and taxes. You can avoid that if you roll over that money into an IRA.

How do I rollover an IRA?

Some companies can directly transfer your old account to an IRA. Others will send you a check that you have to deposit into the IRA. You’ll have 60 days to move those funds into the IRA or pay an early withdrawal fee.