So you finally decided that you want to make more money and start saving for retirement in 2016? Awesome! Go you. It’s time to end that cycle of living paycheck to paycheck and start harnessing the ability of your money to make you even more money. It’s time for you to learn how to open a traditional IRA.
It is incredible the amazing power that saving and investing can have on your life. Below I’ll show you the exact steps you need to get started investing from home, right now.
How You Can Grow $100 into $30,119.86 Starting Today
Investment calculators are SO eye opening, and they’re insanely fun to play with. Below is a screenshot of a scenario I made up to show how you really can start with just a small amount of money and turn it into something big.
Source: DaveRamsey.com
By starting with only $100 dollars and saving $50 a month (something that I know almost all of you can find room to do in your budget), you can grow it to over $30k. Think about what you could do with all of that extra money!
And that’s just the beginning.
If you’re able to put more money to work at the beginning, or able to contribute more each month, OR invest for a longer period of time, your end amount increases immensely. By tweaking my calculator inputs just a little bit (to fit my own circumstances) to a starting balance of $5k; $200 monthly contribution; and 40 year time span, the end amount I’ll have is $780,097.05. This is life-changing amounts of money, and it all starts with only $200 per month.
The most important part of this process, though, is getting started.
To take full advantage of compounding growth, the earlier you start the better. If you decide to put it off (even for just a couple years), your earnings go down. Way down. If you haven’t started your investment journey, today is the best day that you can do it.
If you’ve spent any time on our site, you know that we cant stress do-it-yourself investing enough. Simply put, no one should be managing your portfolio but YOU – even if you consider yourself just a beginner. It’s the best way to grow your nest egg into something substantial, and it can truly change your life down the road.
How to Open an IRA in 8 Easy Steps
In just 10 minutes I can show you how I opened up an Individual Retirement Account (IRA) with TradeKing. There are a bunch of companies you can choose from to open your account, but I’m going to talk about TradeKing in particular because I think they have the most user-friendly platform for new investors, and definitely the best bang for your buck (opening an account is free, and trades are only $4.95 each; well under the industry average). They’ve also got a ton of free resources for you to use, too, which is great.
Step 1: Go to TradeKing.com
Click the red “Start Investing” button to start your sign up through our special affiliate link so you can get $100 in free trade commissions.
There is no minimum deposit for a regular account, which is what you’re going to open. You get to choose how much you want to start with, even if it isn’t much.
Step 2: Set Up Login Info
Self explanatory. If you need help here, do it yourself investing may not be for you
Step 3: Enter Account Information
TradeKing is a reputable and well-respected firm with top notch security, which means your personal information is 100% safe with them.
For the first option, go ahead and choose “IRA”. This will open a Traditional Ira. If you’d like to open a different account type, you can view all of your options by clicking “View All Accounts”. Unfortunately, they only let you open one account at a time, so pick the one you want to open up first!
Quick Note: A Traditional IRA invests pre-tax dollars and lets them grow until your retirement. When you decide to withdraw the cash in your retirement, the withdrawals are taxed at your ordinary income tax rate at retirement. Your contributions to a Traditional IRA are tax deductible, so don’t forget to report them on your tax return!
Step 4: Enter A Little More Information About Yourself
The next few sections are for information that TradeKing is required to gather by FINRA and the SEC (the two major governing bodies of the investment and finance world).
If you don’t know what your tax bracket is, here’s a link to the IRS tax tables for 2016. If you think your tax bracket might change, don’t worry. Just put down your best guess – they just want a general idea of who you are.
For the next section, don’t overthink it! The list goes from least risky to most risky. I put “Growth” as my investment objective because I still have a few decades to invest before I retire, which means I can afford to take on a little more risk in order to get higher returns. Since TradeKing isn’t making any investment recommendations for us, what you put in this section isn’t really all that important. Again, your best guess.
Time Horizon: How long you are planning on investing the money. Since this is your retirement account, you should be comfortable with not touching the money for a long time.
Liquidity Needs: Some investments are more difficult to “cash out” than others. For most investors, highly liquid “Exchange Traded Funds” are used, which are really easy to sell and cash out of. Those are what I use, and they have always served me well.
Risk Tolerance: This one is somewhat subjective. I put “medium” because I want (and am able to) take on some risk to get higher returns, but I also don’t want to put money in wild investments that swing widely in value all the time. Basically, I like being able to sleep at night without worrying about my portfolio
For the purposes of this account, don’t worry about applying for options trading. That’s a whole ‘nother beast.
Step 5: Pick Your Beneficiaries & Submit
Primary beneficiaries are the first to receive funds upon the death of an account owner. These funds may be given to one beneficiary or divided among up to four. Contingent beneficiaries will only receive funds if there are no primary beneficiaries. Here is a helpful article with more information on beneficiaries.
Pro Tip: Review your beneficiaries every year, especially after births and deaths, weddings and divorces. Also note that the beneficiaries you select for your IRA won’t carry over to your nonretirement account, or vice versa.
After you’ve designated your beneficiaries, you’ll be asked to submit your application:
Step 6: Link Your Bank Account to Fund Your New IRA!
TradeKing makes funding their accounts really easy for customers. After you’ve submitted your application, you’re prompted to enter your banking info (again, they’ve got world-class security; your info is safe).
Your Routing Number and Account Number can be found on any of your checks for the account. After entering that, enter your online banking login info:
Go pet your dog while it’s verifying your account….
After that, you’re done!! That’s all there is to it. So…think you can handle these simple steps on how to save for retirement with TradeKing? Click the link below to open your account:
Step 8: Start Investing
After you transfer money into your account, you’re ready to start investing!
Like I said at the beginning of this article, the most important part of this whole equation is getting started now. If you want to really get the most out of your money, you owe it to yourself to do it the right way.
Whether you’re a stock market veteran or a total newbie, it’s usually a good idea to keep your portfolio simple. You don’t need to complicate things! Here are a few articles to help you get started:
- Investing: Where Should I Start?
- 5 Things Every New Investor Should Know
- Do It Yourself Investing
Want a more comprehensive guide on how to save and invest for your retirement? Be sure to check out our ebook, “The Complete Guide to Building Your Own Investment Portfolio“:
And for the same price, you can join our VTX Premium Membership Program, which includes this guide PLUS access to our Model Portfolios, along with a bunch of other resources.
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