How Much Money Do I Need in My Roth IRA Before I Invest It?

Deferred taxes let your retirement fund grow faster.
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There are plenty of reasons to contribute to a Roth individual retirement account. While you won't get the immediate tax write-off offered by a traditional IRA, qualified withdrawals from your Roth account are completely free from federal income taxes. Since the Internal Revenue Service doesn't mandate a minimum contribution, there's no reason to wait to open a Roth IRA.

Minimum Investment

The Internal Revenue Service doesn't stipulate a minimum contribution to your Roth IRA. The IRS does require your Roth IRA to be held by a custodian or trustee, which could be a bank, credit union, insurance company, mutual fund company, investments brokerage firm or other organization approved by the IRS. Your Roth IRA custodian or trustee might require a minimum contribution. Even if your custodian does not have a minimum, the security you want to buy might require a minimum purchase. For example, although your brokerage -- acting as your Roth IRA custodian -- might have no minimum investment requirement, the mutual fund that you want to put into your Roth account might have a minimum purchase requirement.

Fees and Expenses

Financial organizations don't serve as Roth IRA custodians out of the goodness of their hearts. They do it to generate income, either through charging commissions for their products or fees for their services. Some custodians might charge a set-up fee, maintenance fees or withdrawal fees. Others might not have such fees but charge a load, commission or per-transaction fee. These fees and expenses can affect how well your Roth IRA performs. For example, your custodian might charge a $10 transaction fee even for a purchase of $25 worth of stock.

Fully Invested

Since you don't get to take a tax deduction for your Roth IRA contributions, it does you little good to contribute to a Roth IRA if your funds are fully invested. At the very least, you should consider having your contributions deposited in an interest-bearing money market account while you accumulate enough funds to make a minimum investment in another type of security.

Maximum Investment

While the IRS does not stipulate a minimum investment in your Roth IRA, it does limit the amount you can contribute to your account each year. For the 2012 tax year, the most you can contribute is $5,000 unless you are at least 50 years old. After you hit 50 the maximum increases to $6,000. Once those funds are in your account the maximum that you can invest is limited only by the amount in your IRA. For example, if you contribute $5,000 per year for four years, you could invest all $20,000 in a particular security.

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