An individual retirement account allows you to accumulate a tax-deferred retirement fund through a traditional IRA or a tax-exempt retirement fund through a Roth IRA. You can open either type of IRA through banks, mutual funds and brokerages. The federal IRA regulations don’t specify any minimum amount for opening either type of IRA, but the financial institutions offering IRAs can specify opening minimums, says the OpenIRAaccount.com website.
When considering where to open your IRA, you need to ask whether the financial institution has a minimum amount for opening an IRA, and if there’s a minimum for ongoing contributions, says OpenIRAaccount.com. Minimum opening amounts differ by type of financial institution.
Banks typically offer the smallest opening minimums for IRAs, says Kiplinger.com. Some banks will open an IRA for as little as $100 and have no minimum amounts for ongoing contributions. They mostly offer certificates of deposit and money market funds. Banks are a good place to start if you don’t have much to invest in your IRA.
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Mutual funds may offer a higher return on your IRA than a bank, but their minimum investment generally is higher, typically $1,000 or more to open an IRA, says Kiplinger.com. Mutual funds are best for neophyte investors because you spread your risk over a large number of investments at once.
Brokerages offer the broadest range of investment options for the more experienced investor. Their minimum opening investment amounts vary widely but can be substantially more than that of banks or mutual funds, says Kiplinger.com.
Many mutual funds and brokerages will waive their minimum opening requirements if you agree to automatically invest a certain minimum sum into your IRA account each month, says MoneyBlueBook.com. For example, the Fidelity Investments website says Fidelity normally has a $2,500 minimum for opening an IRA account but will let you open an IRA for as little as $200 if you agree to invest at least $200 each month.
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