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How to open an IRA

Apr 12, 2022
Empower Insights

Start saving for retirement in just a few simple steps

An individual retirement account (IRA) is one of the most powerful tools designed to help you save for your future, and opening one is surprisingly easy.

You can open an IRA at Empower or at a range of other large financial institutions, such as banks, brokerage firms and even mutual fund companies. While some IRAs have no minimum deposits, others may require an initial investment of $500 or $1,000.

The sign-up process typically involves providing some basic information — like your name, Social Security number and employment information — and then deciding how to get money into the account. You can transfer funds from an existing bank account or roll over money from another IRA or from a 401(k) plan account.

What kind of IRA should I choose?

The two most common types of IRAs are traditional IRAs and Roth IRAs. Contributions to traditional IRAs are potentially tax deductible. Your savings grow tax-deferred, but withdrawals in retirement are taxed.

With a Roth IRA, your contributions are not deductible, but your money grows tax-free, and retirement withdrawals are not taxed (subject to certain rules). Roth IRAs also don’t require you to begin making withdrawals at age 72 (or age 70½ if you turned that age prior to January 1, 2020) as traditional IRAs do.

You might consider a Roth IRA if you expect to be in a higher tax bracket during retirement — for example, if you’re currently young and earning an entry-level salary. You’re also allowed to have both types of IRAs and even multiple traditional or Roth accounts.

Keep in mind, however, the total annual contribution to all your IRAs in 2022 cannot exceed $6,000, (or $7,000 if you’re 50 or older).

Notebook with Ross and Traditional IRA pro and con listings

Who is eligible to open an IRA?

While pretty much anyone with earned income can open an IRA, there are income limits with a Roth IRA — and sometimes with a traditional IRA — if you also have a workplace 401(k) plan account. (Income limits for a traditional IRA don’t affect your ability to open one, just whether your contributions will be tax deductible).

If you don’t currently have a job but your spouse does, you may be eligible for a spousal IRA, which lets your working spouse open a Roth or traditional IRA in your name.

Even children can have an IRA with an adult custodian, but they must show income from work — such as a paper route or babysitting — and their total contribution is limited to their annual earnings up to $6,000. A Roth IRA is almost always the best choice for kids since their income likely puts them in a low- or zero-income tax bracket.

How to invest in an IRA

Keep in mind that an IRA is not an investment in and of itself. Once you open the account, you need to decide where to invest your money. For example, within an IRA you can invest in stocks, bonds, mutual funds and exchange-traded funds (ETFs). Along with the tax benefits, the flexibility in investment choices is one of the chief advantages of an IRA.

If you’re not comfortable managing investments by yourself, consider working with a financial advisor or opening an IRA with a financial institution that provides advice or automated investing tools.

Learn more about Empower IRAs

Securities, when presented, are offered and/or distributed by GWFS Equities, Inc., Member FINRA/SIPC. GWFS is an affiliate of Empower Retirement, LLC; Great-West Funds, Inc.; and registered investment adviser, Advised Assets Group, LLC. This material is for informational purposes only and is not intended to provide investment, legal or tax recommendations or advice.

“EMPOWER” and all associated logos and product names are trademarks of Great-West Life & Annuity Insurance Company.

©2022 Empower Retirement, LLC. All rights reserved. 1732083

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Carefully consider the investment option’s objectives, risks, fees and expenses. Contact Empower Retirement for a prospectus, summary prospectus for SEC-registered products or disclosure document for unregistered products, if available, containing this information. Read each carefully before investing.

Securities, when presented, are offered and/or distributed by GWFS Equities, Inc., Member FINRA/SIPC. GWFS is an affiliate of Empower Retirement, LLC; Great-West Funds, Inc.; and registered investment adviser, Advised Assets Group, LLC. This material is for informational purposes only and is not intended to provide investment, legal or tax recommendations or advice.

IMPORTANT: The projections, or other information generated on the website by the investment analysis tool regarding the likelihood of various investment outcomes, are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The results may vary with each use and over time.

Investing involves risk, including possible loss of principal.

Insurance products are issued by or offered through Great-West Life & Annuity Insurance Company, Corporate Headquarters: Greenwood Village, CO; or in New York, by Great-West Life & Annuity Insurance Company of New York, Home Office: New York, NY. Guarantees are subject to the terms and conditions of the contract and the claims-paying ability of the insurer.

The managed account service is part of the Empower Retirement Advisory Services suite of services offered by Advised Assets Group, LLC, a registered investment adviser.

The Empower Institute is a research group within Empower Retirement, LLC.

“EMPOWER” and all associated logos and product names are trademarks of Great-West Life & Annuity Insurance Company.

All features may not currently be available and are subject to change without notice. ©2022 Empower Retirement, LLC. All rights reserved.

Unless otherwise noted: Not a Deposit | Not FDIC Insured | Not Bank Guaranteed | Funds May Lose Value | Not Insured by Any Federal Government Agency.