When people say, "You should open an IRA," it sounds simple.
But when you're actually trying to do it for the first time, a lot of questions come up:
Where do I open one?
Can I use my bank?
How much money do I need?
What should I invest in?
Is opening the account enough?
I remember being confused by this myself.
What I eventually learned is that opening an IRA is only the first step. You also need to fund the account and invest the money.
If you're just getting started, here's a simple guide to the entire process.
What Is an IRA?
IRA stands for Individual Retirement Account.
It's a retirement investment account that offers tax advantages to help you save for the future.
The two most common types are:
Traditional IRA
You may receive a tax deduction when you contribute.
Taxes are generally paid when you withdraw the money during retirement.
Roth IRA
You contribute money that has already been taxed.
Qualified withdrawals in retirement are tax-free.
Many investors choose a Roth IRA when they expect to be in a higher tax bracket later in life.
Step 1: Decide Which IRA You Want
Before opening an account, decide whether a Traditional IRA or Roth IRA makes more sense for your situation.
If you're not sure, start by reading:
Traditional IRA vs Roth IRA
401(k) vs IRA
These guides explain the differences in more detail.
Step 2: Choose Where to Open Your IRA
One misconception is that IRAs can only be opened through investment companies.
In reality, you can open an IRA through:
Banks
Brokerage firms
Investment companies
Financial advisors
For example, I opened mine through Chase.
Although I use the Chase app, the investment account itself is managed through J.P. Morgan.
Other popular options include:
Fidelity
Vanguard
Charles Schwab
Merrill
J.P. Morgan
For beginners, choosing a company you already know can make the process feel less intimidating.
Step 3: Complete the Application
Most providers allow you to open an IRA online in about 10–20 minutes.
You'll typically need:
Social Security Number
Date of birth
Address
Employment information
Bank account information
The application process is usually straightforward.
Step 4: Transfer Money Into the Account
This is where many people believe they're finished.
They're not.
After opening the IRA, you must transfer money into it.
You can typically:
Transfer money from a checking account
Set up automatic monthly contributions
Make one-time deposits
At this point, your IRA is funded.
But you're still not finished.
Step 5: Invest the Money
This is the step that surprises many first-time investors.
Just because money is inside an IRA does not necessarily mean it has been invested.
In many self-directed IRAs, the money initially sits in a cash account.
You must then choose investments.
When I first started investing, I was surprised to learn that opening the account and depositing money were not enough.
The final step was actually purchasing investments.
Self-Directed IRA vs Managed IRA
There are two common ways to invest through an IRA.
Option 1: Self-Directed IRA
With a self-directed IRA, you choose your own investments.
You decide:
What to buy
When to buy
How much to invest
This gives you more control but requires more involvement.
My IRA is set up this way.
Option 2: Managed IRA
With a managed IRA, the investment company chooses and manages investments for you.
You answer questions about:
Your age
Retirement goals
Risk tolerance
Investment timeline
The company then creates a portfolio and may automatically adjust it over time.
My husband's retirement account is managed this way.
He doesn't have to decide which fund to buy every month because the portfolio management is handled for him.
Which Option Is Better?
Neither option is universally better.
A self-directed IRA may be a good fit if:
You enjoy learning about investing
You want more control
You prefer lower fees
A managed IRA may be a good fit if:
You want a hands-off approach
You prefer professional guidance
You don't want to choose investments yourself
The best option is the one you'll consistently contribute to over the long term.
Common Beginner Mistakes
Thinking an IRA Is an Investment
An IRA is simply a type of account.
You still need to choose investments.
Funding the Account but Never Investing
This is one of the most common mistakes.
Always check whether your money has actually been invested or is still sitting as cash.
Waiting for the Perfect Time
Many people spend years waiting for the market to drop.
In reality, starting early is often more important than starting perfectly.
Final Thoughts
Opening an IRA isn't as complicated as it first appears.
The process can be summarized in three simple steps:
Open the account
Fund the account
Invest the money
Once you understand that sequence, the rest becomes much easier.
You don't need to know everything before you begin.
You simply need to take the first step.
Recommended Reading
The Psychology of Money by Morgan Housel
One of the best books for understanding long-term investing, patience, and financial decision-making.
Disclosure: Some links on this site may be affiliate links. If you make a purchase through these links, I may earn a small commission at no additional cost to you. I only recommend products I personally use, trust, or believe may be helpful to readers.
Recommended Product
A fireproof document organizer is a practical place to store:
- Birth certificates
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- 529 account documents
- Insurance paperwork
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This is one of those purchases that doesn't feel exciting until the day you need it.
Disclosure: Some links on this site may be affiliate links. If you make a purchase through these links, I may earn a small commission at no additional cost to you. I only recommend products I personally use, trust, or believe may be helpful to readers.
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