Minimum Deposit Required for ROTH

[Guest Jamie R. Bingaman]

My husband and I are both planning on opening a ROTH this year with the money we receive from our tax returns. We file jointly, and I understand that we can open individual ROTH accounts, with our maximum investmets per year being $2000/ account. My question is this: is there a MINIMUM amount that we must invest in order to establish a ROTH? I have been told that the minimum amount needed is $250. Is this true? I have searched high and low for this info. Can someone help?

[John G]

Minimums are set by your custodian (not by the IRS) and vary among banks, mutual funds and brokerages. Some will allow a $250 minimum initial but not all. Some will allow a lower minimum if you make automatic deposits from your checking account.

One potential solution to the small minimum problem is that you flip a coin and one of you opens a $500 account this year, the other gets dibs next year. This also has the added advantage of cutting any potential annual fees in half. Ideally, you would like a custodian with no annual fee.

If you still have less than a minimum amount, then I suggest that you set aside you funds and "pay yourself first" by writing a small check each month for your future IRA. Maybe you can elect to work an extra weekend or some overtime. Another option is to take your current initial amount to a successful grandparent or uncle and ask if they can help you get started by matching your initial. Sure beats a birthday or Christmas gift you may not need.

Good luck.