In a world where the financial future is becoming increasingly uncertain, retirement planning is no longer an option – it's a necessity. In the United States, Individual Retirement Accounts (IRAs) represent a fundamental pillar of retirement planning for millions of savers.
Unlike employer-sponsored 401(k) plans, an IRA can be opened by almost anyone. But how do you go about it? What do you need to pay attention to? And, above all, what type of account is best for you? Here's a clear guide to get you started.
Understanding IRAs
Individual Retirement Accounts (IRAs) are tax-advantaged retirement savings accounts. They enable your savings to grow over the long term, while benefiting from special tax conditions.
There are two main categories for individuals: the Traditional IRA and the Roth IRA.
The Traditional IRA allows you to deduct contributions from your taxable income (subject to conditions), with deferred taxation on gains. You pay taxes on withdrawals at retirement.
The Roth IRA, on the other hand, offers no immediate tax advantages, but withdrawals at retirement are totally tax-free, provided you comply with certain rules.
This choice will depend largely on your current situation and your tax expectations at the time of retirement.
Step 1: Choose the type of IRA that is right for you
Before you even open an IRA account, you need to determine your profile:
- Young professionals: A Roth IRA is often recommended because you're likely to be in a lower tax bracket today, but higher in retirement.
- Well-paid employees: A Traditional IRA may be preferable, especially if you're looking for an immediate tax break.
- Self-employed or entrepreneurs: Consider variants such as the SEP IRA or SIMPLE IRA, which offer higher contribution limits.
Note that the Roth IRA is subject to income limits. For example, in 2025, a single person earning more than $165,000 will not be able to contribute directly to it.
Step 2: Choose the right provider
Today, opening an IRA is quick and easy, thanks in part to online platforms. You can use :
- An online broker if you want to actively manage your investments (stocks, ETFs, bonds, etc.).
- A robo-advisor, an automated solution that selects and rebalances your investments according to your profile.
- A bank, which often offers IRAs in the form of savings accounts or certificates of deposit (CDs), but with a much lower return.
Compare IRA fees (management, transaction, transfer), quality of customer service, user interface and investment options.
Step 3: Open your IRA account
Opening an IRA can be done in just a few minutes on most broker or robo-advisor sites. You'll need to provide:
- Your personal details (name, address, date of birth).
- Your Social Security number.
- Your tax and banking details.
- The designation of a beneficiary in the event of death.
This is also where you choose between a Roth and a Traditional IRA.
Step 4: Funding your IRA
There are several ways to fund your IRA:
- Wire transfer from a checking or savings account.
- Rollover from an old 401(k) plan, which is common after a change of employer.
- Transfer from another existing IRA, with no tax impact if it remains in the same category (Roth to Roth or Traditional to Traditional).
In 2025, contribution limits are $7,000 per year, or $8,000 if you're age 50 or over (thanks to the "catch-up contribution"). You cannot contribute more than your annual taxable income.
Step 5: Invest your IRA funds
An IRA is an account, not an investment. It's up to you to decide where to invest the funds once the account has been opened.
- Beginners: Choose index funds (ETFs) or mutual funds, which are simple, diversified and inexpensive.
- Active investors: Opt for a personalized selection of stocks, bonds or even more complex assets.
- Robo-advisor users: The provider takes care of everything, including adjusting your portfolio over time.
Whatever your choice, adopt a strategy tailored to your retirement horizon and risk tolerance.
Why open an IRA today?
It's never too early, or too late, to start planning for retirement. Compound interest plays a crucial role: the earlier you start, the more time your savings will have to grow.
Even small, regular contributions can make a big difference over the long term. And with uncertainty hanging over the future of Social Security, having a solid private supplement becomes essential.
IRAs FAQs
An IRA (Individual Retirement Account) allows you to make tax-deferred investments to save money and provide financial security when you retire. There are different types of IRAs, the most common being a traditional one – in which contributions may be tax-deductible – and a Roth IRA, a personal savings plan where contributions are not tax deductible but earnings and withdrawals may be tax-free. When you add money to your IRA, this can be invested in a wide range of financial products, usually a portfolio based on bonds, stocks and mutual funds.
Yes. For conventional IRAs, one can get exposure to Gold by investing in Gold-focused securities, such as ETFs. In the case of a self-directed IRA (SDIRA), which offers the possibility of investing in alternative assets, Gold and precious metals are available. In such cases, the investment is based on holding physical Gold (or any other precious metals like Silver, Platinum or Palladium). When investing in a Gold IRA, you don’t keep the physical metal, but a custodian entity does.
They are different products, both designed to help individuals save for retirement. The 401(k) is sponsored by employers and is built by deducting contributions directly from the paycheck, which are usually matched by the employer. Decisions on investment are very limited. An IRA, meanwhile, is a plan that an individual opens with a financial institution and offers more investment options. Both systems are quite similar in terms of taxation as contributions are either made pre-tax or are tax-deductible. You don’t have to choose one or the other: even if you have a 401(k) plan, you may be able to put extra money aside in an IRA
The US Internal Revenue Service (IRS) doesn’t specifically give any requirements regarding minimum contributions to start and deposit in an IRA (it does, however, for conversions and withdrawals). Still, some brokers may require a minimum amount depending on the funds you would like to invest in. On the other hand, the IRS establishes a maximum amount that an individual can contribute to their IRA each year.
Investment volatility is an inherent risk to any portfolio, including an IRA. The more traditional IRAs – based on a portfolio made of stocks, bonds, or mutual funds – is subject to market fluctuations and can lead to potential losses over time. Having said that, IRAs are long-term investments (even over decades), and markets tend to rise beyond short-term corrections. Still, every investor should consider their risk tolerance and choose a portfolio that suits it. Stocks tend to be more volatile than bonds, and assets available in certain self-directed IRAs, such as precious metals or cryptocurrencies, can face extremely high volatility. Diversifying your IRA investments across asset classes, sectors and geographic regions is one way to protect it against market fluctuations that could threaten its health.
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