How to open your first Roth IRA: a step-by-step walkthrough

A couple of my daughter Thalia’s friends asked me recently how to open a Roth IRA. They had just turned 18, they had some summer job money, and they wanted to know where to actually put it. I had not really planned on this post but I felt the universe was trying to tell me there is a need. The birth of this blog stemmed from seeing my kids and their friends behind in the land of personal finance knowledge.

So here is the answer, start to finish. If you are somewhere between 18 and 25 and you have earned some money, this will walk you through opening the account and making your first contribution. If you are a parent who wants to help your kid do this but you are not sure of the current mechanics yourself, this is for you too. You will both be able to act by the time you finish reading.

This is the step that comes right after Your First Paycheck: What to Do Before You Get Paid. If you have not read that one, it sets up everything below.

What a Roth IRA actually is

A Roth IRA is a retirement account you fund with money you have already paid taxes on. It grows tax-free for decades, and when you take it out in retirement it comes out tax-free. That is the whole idea. You pay the tax now, at a point in your life when your tax rate is probably about as low as it will ever be, and you never pay tax on the growth again.

For a young person with a 40-plus-year runway, that is close to the best deal in the entire tax code. Decades of compounding, and none of it taxed on the way out.

I truly try to live by a decree of ‘No Regrets’ but, if I were to break that decree, not opening a Roth IRA when they first came out would be high on the list. I never opened one and I have tax issues today I might not otherwise have.

Do you qualify? The earned income rule

There is one requirement, and it is earned income. Read this part carefully, because it is the piece that decides whether you can contribute at all.

To contribute to a Roth IRA in a given year, you must have earned income that year. Earned income means money you were paid for work. Wages from a job. Self-employment income from freelance or gig work. That is what counts.

What counts: W-2 wages from any employer, including a summer job or part-time work. Self-employment income from tutoring, babysitting, mowing lawns, coaching or any freelance work where you got paid for a service.

What does not count: money from your parents (unless you truly work for a family business and receive a W-2 or 1099), birthday money, allowance, scholarship money or interest and dividends. None of that is earned income, and none of it qualifies you to contribute.

Here is a strategy for families in a position to use it. Say your kid earned $3,000 at a summer job but spent all of it on gas, food and life. The dollars that go into the Roth do not have to be the exact dollars the kid earned. A parent can gift the kid up to the earned amount, $3,000 in this case, to put into the account. The requirement is that the kid earned the equivalent, not that the kid’s own paycheck is what funds it. For a family that can afford this, it is a real way to get a young person decades of compounding started early.

How much you can contribute

The limit is simple. You can contribute the lesser of two numbers: $7,500 for 2026, or your total earned income for the year. Whichever is smaller.

So a kid who earned $3,500 at a summer job can contribute up to $3,500, not more. A kid who earned $9,000 can contribute up to the full $7,500. Your earned income is the ceiling until it passes $7,500, and then $7,500 becomes the ceiling.

One more limit is worth naming, even though it almost never applies at this age. If a young adult lands a high-paying first job, Roth eligibility starts to phase out once income climbs high enough. For 2026 that phase-out begins at $153,000 of modified adjusted gross income for a single filer. Below that, contribute freely. If you are 22 and already earning six figures, that is a good problem to have, and most readers will be nowhere near it.

One quick note if a first job just handed you 401(k) paperwork at the same time. Many workplace plans now offer a Roth 401(k), which is a second door into Roth money that works on the same tax-free principle. It is a separate account with its own and far higher limit, $24,500 for 2026, so do not confuse that number with the $7,500 here. If your employer offers it, that is another good place to build Roth savings. For now though, the account we are opening is the Roth IRA.

If you are also carrying debt or you have a 401(k) match waiting at a job, the order you tackle these in matters. I laid out the full priority framework in Should You Pay Off Debt or Invest? The short version: grab the employer match first, kill high-interest debt second, then fund the Roth.

Where to open it

There are many places you can open a Roth IRA. Truly, it is a long list. For me, three brokerages are the right call for this: Schwab, Fidelity and Vanguard. All three are long-established, fully regulated and SIPC-insured. All three offer commission-free trades and no-minimum Roth IRA accounts. You cannot go wrong with any of them.

A quick word on the apps you have probably heard of. Robinhood, Public and Webull are built to encourage frequent trading, with the confetti and the notifications and the constant nudge to do something. A Roth IRA is the opposite of that. It is a place you put money and leave alone for 40 years. Serious long-term money belongs at a serious long-term institution. That is not a knock on anyone. It is a matter of matching the tool to the job.

I personally like Schwab but it is also what I am most familiar with. It has been around since 1971, the customer service is human and reachable, and the interface is clean with none of the gamification. The walkthrough below uses Schwab as the example, but the process is nearly identical at Fidelity or Vanguard, so if you already lean toward one of those, follow along and the steps will map over.

And one reassurance for a first-time account holder. Brokerage accounts at these firms are covered by SIPC, which protects up to $500,000 per account, including up to $250,000 in cash, if the brokerage itself were ever to fail. That is protection against the firm going under, not against normal market ups and downs, but it is real, and it is worth knowing your money is not sitting somewhere unprotected. A Roth IRA gets its own coverage separate from any other account you hold there.

The Schwab walkthrough, step by step

Before you start, have these in front of you:

• Your Social Security number
• A driver’s license or passport
• Your bank’s routing number and your account number, for funding the account
• Your employer’s name and address, if you have a current job

Once you have those, here is the flow. Schwab groups it as the application first, then funding and investing:

1. Go to schwab.com, open a new account and choose Roth IRA. Schwab shows a short informational page about the account before you begin.
2. You will be asked for your personal information. Schwab walks you through a series of prompts for things like your Social Security number, date of birth, home address and contact information. Just answer them as they come.
3. Add your employment information, your current work status and employer details if you have a job. If your income came from self-employment, you indicate that here.
4. Name a beneficiary, the person who would inherit the account. Schwab may also invite you to add a trusted contact, someone they can reach out to if they ever see something unusual on the account. Both take a minute and are worth doing.
5. Link your bank account so you can move money in. This is where the routing and account numbers come in, connecting your checking account to the Roth.
6. Transfer your first contribution, then choose what to buy: a broad index fund or ETF, or leave it in cash and pick later.

After You Submit

Along the way Schwab has you create login credentials and verify your identity, usually with a code sent to your phone or email. The exact order of these screens can vary, and Schwab may recognize information it already has if you already have a different account with them, so just follow the prompts as they come. The whole thing takes about 10 minutes. Schwab sends your new account number as soon as the application is approved, often right away, sometimes within a business day or two while they verify your identity and the bank link. A first transfer from a newly linked bank account can take a few business days to clear before the money is available to invest, so do not be thrown by a short hold on that very first deposit. It is normal.

What to buy on day one

Once the account is open it is time to choose what to buy. For a young person with a multi-decade time horizon, a single broad-market index fund or index ETF is a completely reasonable first and only holding. Something that tracks the total US stock market or the S&P 500. You do not need to pick individual stocks, and you should not try to yet (if you are older with experience, opening your first Roth IRA, go for it if you feel comfortable). Put the money in a broad index fund and let time do the work. That is one decision, and it is enough to start.

Set up automatic contributions

One optional step matters more than it looks. Inside your account you can set up a recurring transfer, say $50 a month, that moves automatically from your checking account into the Roth. You do not have to. But automating it means the habit takes care of itself. I ran the actual numbers on starting young in Start Saving with Your First Paycheck, and the difference a single decade of delay makes is hard to believe until you see it laid out. Even $50 a month starting at 18 becomes real money by the time you are ready to retire. Set the transfer once and let it run.

Open it this weekend

So here is the whole thing in one breath. If you have earned income and you are somewhere between 18 and 25, open the account this weekend. Pick Schwab or Fidelity or Vanguard, spend your 10 minutes, link your bank and put in what you can. Buy a broad index fund if you are new to the stock market. If all you can start with is $100, start with $100. The exact number matters far less than the fact that the account now exists and the habit has begun……

The best time to start was the day you earned your first dollar. The second-best time is now.

Start investing. Stay consistent. Give your money time to grow.

Cheers!

Christopher