All About IRAs – Part 2: How to Open a IRA

All About IRAs - Part 2: How To Open an IRA



Here is the first part or the DIY Money Guy Series: All About IRAs

Part 1 – How to Choose Traditional vs. Roth


Part 2 – How to Open an IRA

In my last article I discussed the difference between traditional and Roth IRAs. While that may seem like a completely different language to some people, it’s worth a read to help you figure out the best way to save money for retirement. An IRA is a great way for anyone to start or add to their retirement savings. You can open and even manage an IRA account from a computer or even your phone nowadays. You'll be able to watch your savings grow over time and help build that retirement nice nest egg. In this article I am going to both tell you and show you how to open an IRA with Vanguard, the largest investment management company.


What You Need to Open Account

Similar to opening just about any type of financial account, you will need a few pieces of information: social security number, U.S. street address, employer name and address, your checking or savings account number along with the routing number to transfer funds into IRA. You'll also need a minimum of $1,000 to fund the account.


How to Open an IRA Account

Vanguard makes opening an IRA pretty simple. The whole process should only take about 10 minutes. Vanguard even break it down to just three steps: 1) Decide if you want a traditional or Roth IRA, or both, 2) Pick investments for your IRA, 3) Open account online.

Here’s a walk through the process with the screenshots so you will know what to expect when you open your own IRA:

The screenshot below is the the landing page for opening a Vanguard IRA. On this page Vanguard offers their own comparison of Roth vs. traditional IRAs.

Click on the red “Open your IRA today” button in the top right of the screen to get started. 




On the second screen Vanguard prompts you to log in. I assume most of you do not already have a Vanguard account so check the “No” field and click “Continue”




The next screen reviews the process and information needed to open the account. We have already discussed all of this so keep moving right along and click “Continue”.




On this screen Vanguard is asking “Why are you investing?” Since we’re here to open an IRA select “Retirement.”




On the same screen we get the next set of questions about the account type. I assume most of you will be better off by opening a Roth IRA, or a few of you may be selecting a traditional IRA. Make your selection then click “Continue.”


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Your general personal information is asked for on the next screen. Yes, you will need to put in your social security number and your email address. Vanguard has great security comparable to all of the top banks and financial firms across the world. As of March 2016 Vanguard has $3.6 TRILLION under management. Written out as a number that is $3,600,000,000,000. There are countless people, businesses, and corporations with accounts with Vanguard so you should feel comfortable and confident with Vanguard. If you're comfortable with an online account for checking or a credit card then you should feel comfortable with a Vanguard account. Type in your information and click “Continue.”




More general information: mailing address and phone number then click “Continue”




Job time! This next section is about your employment. Just be honest with you answers to avoid any issues later on down the road.




Looking for more employment information: occupation, employer, employer address, etc.




The next screen asks the mount you are wanting to contribute to the IRA for the current tax year. Put in at least $1,000 and an annual max of $5,500.




Next, decide what you would want to do with any dividends you receive from stocks, mutual funds, or ETF’s. You have two options: reinvest the dividends or send money to a money market account. Reinvesting means that any money you get from dividends payments will be used to purchase more of the same security (stock, mutual fund, etc.) that the dividend came from. The second option is “Transfer to your money market settlement fund.” If you choose this option then any money you get from dividends will be in a money market account and you can use the money for other investments in your IRA. But if you try to withdraw this money from your account you will end up having to pay taxes on the amount taken out. I think it is best to just reinvest the dividends and watch the value of your account grow that much quicker.




You’re so close to being done now. See that wasn’t that hard. Just review everything checking for any typos and if it all looks good. Click “Submit” at the bottom.





And BAM! You’re done. Give Vanguard a little time to review everything and they will shoot you and email with your approval or if they need any other follow up information.


Action Item

You have enough money to open an account so just do it and go open the account. Use this link to get started: Open Vanguard IRA



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