Here are 5 steps to opening an IRA to start saving for retirement

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• You can open IRAs through several types of institutions, including banks, brokerages and robo-advisors.
• There are several kinds of IRAs to choose from: Traditional, Roth, and SEP IRAs are three common options.
• You can choose both hands-on and hands-off methods for managing your IRA.

IRAs - or individual retirement accounts - are one of the many ways you can plan for retirement. There are several types of accounts to choose from, including some that allow for tax-free withdrawals once you retire.

Are you considering using an IRA to reach your retirement goals? Here's how to get started.

Step 1: Choose where to open your IRA

The first step is to choose what type of institution you'll open your IRA through. There are many options to choose from, including banks, brokerage firms and robo-advisors.

If you want a hands-off role in your IRA, then a robo-advisor may be a better choice. These typically come with low management fees, risk-based investment options, automatic portfolio balancing, and other perks. They can often be managed easily using an online dashboard.

For more hands-on investors, a brokerage may be a better option. Brokerages offer full-service management and may have a wider selection of investments. If you want the most economical option, consider looking for brokers with low or no account fees and a variety of commission- and fee-free investment options. These are often called discount brokers.

Avoid basing your decision off fees or commissions entirely. While choosing an affordable solution is important, other factors should play a role, too, including your level of tech-savvy, your investment know-how, the institution's investing minimums, and the service they're known for.

"Consider the overall service you'll be receiving," says Heather Welsh, vice president of wealth planning at Sequoia Financial Group. "While robo-advisors are generally inexpensive, your level of comfort with technology might suggest taking a different direction and talking with your bank or financial advisor."

Step 2: Select your IRA account type

There are several types of IRA accounts to choose from. Some offer tax-free withdrawals upon retirement, while others qualify you for a valuable tax deduction now.

Here are the main types of IRAs you'll want to consider:

• Traditional IRAs: These account types are tax-deferred, meaning you fund the account with pre-tax earnings, and then pay income taxes on the withdrawals later on. Contributions are tax-deductible, and you can begin withdrawing money as early as age 59.5.
• Roth IRAs: These are funded with post-tax income - money you've already paid income taxes on. Because of this, withdrawals in retirement are not subject to taxes. This makes them a smart option if you expect to have a higher tax bracket later on. Unlike traditional IRAs, Roth IRA contributions are not tax-deductible.
• SEP IRAs: Simplified Employee Pension IRAs are for business owners and self-employed professionals. They work similarly to a traditional IRA: They're funded with pre-tax earnings and withdrawals are taxable in retirement.

Quick tip: Other types of IRAs include SIMPLE IRAs, designed for small business owners, and Payroll Deduction IRAs, which allow employees to contribute directly out of their paychecks. Talk to a financial advisor for more guidance on these types of IRAs.

Step 3: Open your IRA account

Opening your account is usually pretty simple, and often, can be done online or easily through your brokerage. However, the exact process will vary.

"How you open an account will depend on your selected IRA provider or advisor," Welsh says. "If you take the do-it-yourself approach, you can likely do it online. If you work with a bank or advisor, you will be provided with forms to open the account, either electronically or in hard copy depending on their processes and your preferences."

Typically, you'll be asked for the following documentation and information:

• A copy of your government-issued ID, such as a driver's license or passport
• Your personal information, including your name, phone number, address, date of birth, and Social Security number
• Details on your beneficiaries, or who you'd like to inherit the account when you die
• Your preferred contribution method
• Banking information (if you want to fund the account with an electronic transfer) or information on your other 401(k) or IRAs (if you're doing a rollover)

If you opt to roll funds over from a 401(k) or another retirement, you'll also have some forms to fill out there. Some will send the money directly to your new IRA account. Others may send you a check, which you'll then need to deposit into the new IRA yourself. Typically, the whole process takes anywhere from two to four weeks.

If you rollover funds to a traditional IRA, you won't need to pay taxes on the funds (until you start making withdrawals). If you roll over funds to a Roth IRA, though, you'll owe taxes on the rolled-over amount when you file your annual returns.

Quick tip: If you receive the rollover check directly, make sure to deposit it quickly. If you fail to deposit your rollover funds within 60 days, it will qualify as a withdrawal and could mean a penalty if you are not of retirement age.

Step 4: Make contributions to your IRA

Once your IRA has been established, you can begin making contributions. You do this via rollover, check, or electronic payment or, in some cases, you may be able to link your bank account and directly transfer funds.

"As a general rule, I'd say the most you can add to your retirement funds, the better off you'll be in the future," says Scott Staton, founder and president of Staton Financial Group.

Keep in mind that you can't contribute more than the IRS' annual limit. Here's how those limits break down for traditional IRAs:

And these are the limits on Roth IRAs:

If you have a SEP IRA, they're limited to 25% of your annual compensation or $58,000, whichever is less.

Quick tip: Contribute as close to the maximum amount as possible each year. Just be sure your contributions fit your budget, and consider scaling back on your risk as you get closer to retirement age.

Step 5: Start investing your funds

After you've funded your account, you can begin investing. There are many options for investments, including stocks and bonds.

"One important thing to understand is, an IRA isn't an investment, nor does it pay a particular rate of return," Staton says. "What determines the rate of return and level of risk of an IRA are the investment choices you make within it."

Your options for investing include:

• Stocks: These allow you to purchase ownership shares of publicly traded companies.
• Bonds: Bonds are debt securities, which offer money to investors and, often, the government. They're one of the lowest-risk investments you can make.
• Index funds: These are stock portfolios that aim to match the returns of a specific market index, like the S&P 500, for example.
• Exchange Traded Funds: Exchange Traded Funds, or ETFs, are baskets of securities that track an index, like the S&P 500 - similarly to index funds. These can be traded throughout the day on the stock market.
• Mutual funds: Mutual funds are investment pools made up of many different investments. They're managed professionally, and individual consumers can buy shares in the fund.

The latter - mutual funds - come in many forms, including target-date funds. These funds operate with a certain retirement year in mind. As you approach that date, the investments shift, reducing your risk and exposure to loss.

Quick tip: You don't have to choose just one type of investment. You can - and should - diversify your portfolio with investments in several types of securities. This reduces your exposure to risk.

The financial takeaway

IRAs can be a useful tool in planning for retirement. To ensure your IRA investments are as successful as possible, be careful about which type of account you choose and what institution you opt to manage it.

If you're not sure or just need guidance, talk to a financial advisor or Certified Financial Planner. They can provide advice personalized to your exact goals and finances.

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