How To Invest in a Roth IRA

A Roth individual retirement arrangement (IRA) lets taxpayers save their retirement money free from tax, with the tax benefits occurring when withdrawals are performed. This form of IRA was pushed through by Senator William Roth of Delaware and is subject to certain income limits and rules.

Here are ways to invest in a Roth IRA:

  • Research your potential investments. A lot of financial institutions offer Roth IRAs, and each appeal to different types of investors. Check out online information from the official websites and discussion boards and find out the fees involved, the types of investments available, reputation of the organization and historical performance.
  • Convert existing IRA into Roth IRA. Contact the custodian of your traditional IRA and inform him of your desire to convert it to a Roth IRA. The custodian may want you to sign a form stating your intent and another form promising that you will pay the necessary federal tax on your traditional IRA prior to conversion.
  • Consider the Big Three. Fidelity Investments, The Vanguard Group and T. Rowe Price are fund groups that are not only huge but also provide a wide range of investment types that will suit the needs of different types of investors. Novice Roth IRA investors can rely on one of these three groups, some of which offer cost-free Roth IRA funds.
  • Consider mutual funds. A mutual fund has less risk compared to single stocks while having a higher rate of return compared to a savings bond. To qualify, your earned income must be less than USD 95,000. Choose a mutual fund company and the type of fund then contact them and request for a Roth IRA mutual fund investment form. Answer the form properly and send it back to the company with a check for the amount you’re investing. The company may also send information about the mutual fund, which contains its historical performance as well as other details. You can study this information, ask any questions to the investment personnel then follow your fund’s performance online.
  • Consider discount brokers. If you’re feeling confident and willing enough to buy individual stocks instead on relying on investment groups or mutual funds, then discount brokers are worth a look. They require less fees due to lower overhead expenses and basic brokerage services. Discount brokers are also the preferred option for investors with insufficient funds to start an account with established fund managers.
  • Fill out an investment form. Once you decided on an investment, check their websites and look for downloadable IRA forms. Print them, fill out the necessary information, and then transfer the money to your account. Many companies also allow online application.
  • Monitor the performance of your investment. Investment firms have websites where clients can check their account to see how their portfolio is performing. Reserve a monthly portion of your income for your investment.

A Roth IRA investment becomes more appealing if you start at a younger age, since there will be more time for the money inside the investment to grow. Study your options and decide on whether a Roth IRA will be more advantageous for you.


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