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A Young Investor's Journey to Opening and Funding a Roth IRA

Retirement Daily assistant editor Hannah Sammut describes her journey to opening and funding her Roth IRA.

OK, OK. I have to come clean. It’s been weighing on my conscience for a bit. I’ll admit it— I’ve never opened a Roth IRA.

I know, I’m aware of how this looks. That being said, I did hear that getting started is the hardest part. Maybe I’m subconsciously afraid of placing my faith in a financial institution (not very true). Maybe I haven’t had the time to research exactly where I want to place my funds (slightly true). Maybe I’m afraid of taking yet another step towards being a completely financially-independent adult (bingo). It was nice while it lasted. How can I promote financial responsibility when I haven’t even opened an IRA for myself?

It’s time to grow up.

Luckily, I have tons of resources and have heard a lot of advice about what my best plan of action should be. However, if there’s one thing I learned at Retirement Daily, it’s that what may work for one individual may not necessarily work for another. For me, it made sense to open a Roth IRA, since distributions will be taxed upfront and not during withdrawal (key thing to keep in mind; if you anticipate being in a higher tax bracket later on in life, then it may make sense to have a Roth IRA versus a traditional IRA. Since I’m still a student, I anticipate making a bit more money over my career).

I wanted a custodian that was user-friendly and low-cost. I also wanted an IRA with zero account minimums. I was in between Vanguard and Fidelity, which include virtually all of the same features, but I ultimately picked Fidelity because it offered a few more investment options.

It’s also important to remember that if I want to change my custodian at any time, I can (penalty-free), as long as my funds are still placed in a Roth IRA.

I was curious about the robo adviser option and liked that it was free for accounts with a balance under $10,000. After I input my risk tolerance and goals, a pie chart was shown with suggested allocations. Since I have over 30 years until I retire, my portfolio reflected an opportunity to take more risk and was therefore primarily comprised of stocks.

After doing some research myself, I decided that I want a hands-off approach to my IRA. Again, this makes sense since I have the maximum amount of time before I retire. At least for now as a busy college student, I was comfortable placing my funds in exactly what my robo adviser suggested.

I’ll also add that I don’t have a lot of funds in my account to begin with, so I feel that the stakes are not too high for me yet. That also means that if the stock market tanks tomorrow, I don’t need to sell my investments, as I have time to make up potential losses.

In short, let this be the push you need to open a Roth yourself.