An individual retirement account (IRA) is one of the most powerful tools designed to help you save for your future, and opening one is surprisingly easy.

You can open an IRA at financial institutions, such as banks, brokerage firms and even mutual fund companies. While some IRAs have no minimum deposits, others may require an initial investment of $500 or $1,000.

The sign-up process typically involves providing some basic information — like your name, Social Security number and employment information — and then deciding how to get money into the account. You can transfer funds from an existing bank account or roll over money from another IRA or from a 401(k) plan account.

What kind of IRA should I choose?

The two most common types of IRAs are traditional IRAs and Roth IRAs. Contributions to traditional IRAs are potentially tax deductible. Your savings grow tax-deferred, but withdrawals in retirement are taxed.

With a Roth IRA, your contributions are not deductible, but your money grows tax-free, and retirement withdrawals are not taxed (subject to certain rules). Roth IRAs also don’t require you to begin making withdrawals at age 72 (or age 70½ if you turned that age prior to January 1, 2020) as traditional IRAs do.

You might consider a Roth IRA if you expect to be in a higher tax bracket during retirement — for example, if you’re currently young and earning an entry-level salary. You’re also allowed to have both types of IRAs and even multiple traditional or Roth accounts.

Keep in mind, however, the total annual contribution to all your IRAs in 2022 cannot exceed $6,000, (or $7,000 if you’re 50 or older).

Who is eligible to open an IRA?

While pretty much anyone with earned income can open an IRA, there are income limits with a Roth IRA — and sometimes with a traditional IRA — if you also have a workplace 401(k) plan account. (Income limits for a traditional IRA don’t affect your ability to open one, just whether your contributions will be tax deductible).

If you don’t currently have a job but your spouse does, you may be eligible for a spousal IRA, which lets your working spouse open a Roth or traditional IRA in your name.

Even children can have an IRA with an adult custodian, but they must show income from work — such as a paper route or babysitting — and their total contribution is limited to their annual earnings up to $6,000. A Roth IRA is almost always the best choice for kids since their income likely puts them in a low- or zero-income tax bracket.

How to invest in an IRA

Keep in mind that an IRA is not an investment in and of itself. Once you open the account, you need to decide where to invest your money. For example, within an IRA you can invest in stocks, bonds, mutual funds and exchange-traded funds (ETFs). Along with the tax benefits, the flexibility in investment choices is one of the chief advantages of an IRA.

If you’re not comfortable managing investments by yourself, consider working with a financial advisor or opening an IRA with a financial institution that provides advice or automated investing tools.