It’s easy to open an IRA. All you do is fill out a relatively simple application provided by the bank, mutual fund company, brokerage firm, or other financial institution you choose to be custodian of your account.
Because IRAs are self directed, which means you decide how to invest the money, you’re responsible for following the rules that govern the accounts. Basically, that means putting in only the amount you’re entitled to each year and making approved investments. You must also report your annual contribution to a traditional IRA to the IRS, on Form 1040 or 1040A if it’s deductible and on Form 8606 if it’s not.
You can invest your IRA money almost any way you like that’s available through your custodian, from putting it in sedate savings accounts to buying volatile options on futures. The things you can’t choose are fine art, gems, non-US coins, and collectibles. You can buy and sell investments within your IRA and reinvest the money whenever you please without worrying about paying tax on any gains. But you may pay sales charges and other fees on those transactions.
You have until April 15—the day tax returns are due—to open an IRA and make the deposit for the previous tax year. If April 15 falls on a Saturday or Sunday, your deposit is due by Monday, April 16 or 17, or sometimes as late as April 18.
You can put money into your IRA in a lump sum, or spread your contribution out over up to 15 months. You may put in the whole amount the first day you can, January 1 of the tax year you’re making the contribution for. Or, if you’re like most people, you’re more apt to make the deposit on the last possible day, which is April 15 for the previous tax year.
The most practical solution may be weekly or monthly contributions, perhaps as direct debits or electronic transfers from your checking account. There are no guarantees when you invest this way, any more than there are when you invest a lump sum. You could lose money, especially in the short term. But if your investments do well, adding to them regularly can give your account value a real boost.