When Do I Open and Close an Individual Retirement Account (IRA)?

There aren't a lot of hard-and-fast rules when it comes to an individual retirement account. As the name implies, how one is used is largely at the discretion of its owner - as is the type of IRA chosen (such as a traditional or Roth IRA, as well as more specialized types like the SIMPLE, SEP or Education IRAs). Following is some information to help you decide when is best for you to open or close out your individual retirement account.

Opening an Individual Retirement Account

The first thing to consider is that it's never too soon to get started. As soon as you're accruing income, you can and perhaps should begin putting some aside for your future. Because of the nature of compound interest, you'll benefit in measurable ways even by getting started in very small increments just a few years earlier.

Similarly, it's never too late to open an individual retirement account. Even with only a limited number of years, you can still gain greater interest through this type of account than you can with most other easily managed, low-risk types of investment. The only facts that you need to keep in mind are that with a Roth IRA, you must have an account open for at least five years to begin withdrawing money. With a traditional IRA, you need to take your money at age 70.5 regardless of circumstance, so starting very close to this age may not make as much sense.

Your biggest concern when opening an IRA will be choosing the right financial firm to go with. This is likely to be a long-term partnership, so you should do your research and choose carefully. There is a wide variety of factors that may impact your decision, from minimal yearly contributions to initial start-up fees. Compare your options closely, and remember to be competitive. And you may want to closely examine the bank's rules for closing an individual retirement account.

Closing an Individual Retirement Account

There are almost always very costly penalties for closing an IRA before retiring. You should meet with a financial advisor with the aim of circumnavigating a situation where you'd need to close your individual retirement account early. In any other event, you will be receiving your money with interest when you reach 70.5 with a traditional IRA, at which point you will only be paying taxes on it. With a Roth IRA, you've already been taxed and there's no fixed age to withdraw your money.

TM Murphy is a professional writer who lives in NYC. She currently specializes in fashion, beauty, marketing and finance articles. Believing that it's never too late to open an individual retirement account, she often turns to http://www.discoverbank.com for recommendations and advice. TM Murphy has been writing full-time since 2006, when she graduated with a B.A. in English from Northeastern University.

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