Roth IRA for beginners: what it is, how to open one, and what to put in it
A Roth IRA is the best retirement account most young people never open. It doesn't require an employer. It doesn't require much money. It just requires earned income and the decision to start. Everything that grows inside it — for the rest of your life — comes out tax-free at retirement.
Here's what it is, how it works, and the exact math of what opening one at 22 is worth at 65.
What a Roth IRA actually is
A Roth IRA (Individual Retirement Account) is an account you open yourself at a brokerage — not through your employer. You fund it with money you've already paid income tax on. In return, the IRS lets everything inside the account grow tax-free, and you pay zero taxes when you withdraw it at retirement (age 59½ or later).
Compare that to a traditional 401(k): you get a tax deduction now, but pay income tax on every dollar you withdraw in retirement. With a Roth IRA, the tax is paid once, upfront — and then it's done, permanently, no matter how large the account grows.
The core Roth IRA math: if your account grows from $10,000 to $500,000 over 40 years, you pay no tax on the $490,000 of growth. With a traditional account, you'd owe income tax on the full $500,000 when you withdraw it. That difference compounds dramatically for a 22-year-old.
The rules you need to know (2026)
| Rule | Detail |
|---|---|
| Contribution limit | $7,500/year ($8,600 if age 50+) |
| Income eligibility | Must have earned income. Contribution cannot exceed earned income. |
| Income phase-out (single) | Begins at ~$153,000 MAGI; eliminated above ~$168,000 |
| Income phase-out (married filing jointly) | Begins at ~$242,000; eliminated above ~$252,000 |
| Withdrawal of contributions | Any time, penalty-free (you already paid tax on it) |
| Withdrawal of growth | Tax-free after 59½ + 5-year rule met; penalties if earlier |
| Required minimum distributions | None (unlike traditional IRA/401k) |
| Contribution deadline | Tax filing deadline (April 15 of the following year) |
At 22 and earning a typical entry-level salary, you almost certainly qualify. Most young people don't have income high enough to trigger the phase-out — that only affects higher earners later in their career.
The verified math: $1,000 now + $200/month starting at 22
Setup: open a Roth IRA at 22, deposit $1,000 as an initial lump sum, then contribute $200/month. Average annual return: 7% (monthly compounding, r = 0.005833/month).
Lump sum $1,000 at 22 grows to:
At 30 (8 yr): $1,000 × (1.07229)^8 = $1,000 × 1.74784 = $1,748
At 40 (18 yr): $1,000 × (1.07229)^18 = $1,000 × 3.51282 = $3,513
At 50 (28 yr): $1,000 × (1.07229)^28 = $1,000 × 7.05936 = $7,059
At 65 (43 yr): $1,000 × (1.07229)^43 = $1,000 × 20.1104 = $20,110
$200/month contributions grow to:
At 30 (8 yr, 96 mo): $200 × (1.74784 − 1) / 0.005833 = $200 × 128.2 = $25,644
At 40 (18 yr, 216 mo): $200 × (3.51282 − 1) / 0.005833 = $200 × 430.9 = $86,174
At 50 (28 yr, 336 mo): $200 × (7.05936 − 1) / 0.005833 = $200 × 1,038.8 = $207,760
At 65 (43 yr, 516 mo): $200 × (20.1104 − 1) / 0.005833 = $200 × 3,276.4 = $655,280
Total (lump sum + monthly contributions):
| Age | Lump Sum Portion | Monthly Contribution Portion | Total Balance |
|---|---|---|---|
| 30 | $1,748 | $25,644 | $27,392 |
| 40 | $3,513 | $86,174 | $89,687 |
| 50 | $7,059 | $207,760 | $214,819 |
| 65 | $20,110 | $655,280 | $675,390 |
Total contributions over 43 years: $1,000 + ($200 × 12 × 43) = $1,000 + $103,200 = $104,200. Total balance at 65: $675,390 — all of it tax-free. The account generated $571,190 in tax-free growth on top of the money you put in.
How to open a Roth IRA at Fidelity (step by step)
- Go to fidelity.com and click "Open an Account." Select "Roth IRA." You'll need your Social Security number, a bank account for funding, and a government ID.
- Complete the application. Takes about 10–15 minutes. There's no minimum balance required to open.
- Transfer your initial deposit. Even $50 works. The money will appear in the account in 1–3 business days.
- Buy FZROX (Fidelity ZERO Total Market Index Fund — 0% expense ratio). Search for it in the account, enter the dollar amount, confirm. The fund covers thousands of U.S. companies in one purchase.
- Set up automatic monthly contributions. Under "Accounts & Trade" → "Transfer" → "Set up automatic transfers." Choose your amount and monthly date. This is the most important step — automation beats willpower every time.
You now have a Roth IRA investing automatically. You don't need to log in again until you want to increase your contribution or check your balance for motivation.
What not to do
- Don't pick individual stocks. The research showing that index funds outperform stock pickers over 10+ years is overwhelming. Buy the market, not bets on individual companies.
- Don't over-contribute. If you put in more than you earned (or more than $7,500), the IRS charges a 6% excise tax per year on the excess until you fix it.
- Don't withdraw the growth early. You can withdraw your contributions (not the growth) anytime without penalty. Withdrawing growth before 59½ generally triggers a 10% penalty plus income tax.
- Don't skip a year because the amount feels too small. Even $600 contributed at 22 is worth $600 × 20.11 = $12,066 tax-free at 65. Small amounts at 22 are worth more than large amounts at 42.
If you're also thinking about broader investing strategies beyond the Roth IRA, this post on investing as a student covers the brokerage account setup and what to invest in outside of retirement accounts.
One thing to do before April 15
Roth IRA contributions can be made for the previous tax year up to the tax filing deadline. If you haven't opened one yet and you had earned income last year, you can open an account today and contribute for last year. You potentially get two years' worth of contributions in one move.
The Roth IRA is one of the few places where the government explicitly tells you: put money here, and you will never pay taxes on it again. For a young person with low income and decades of compounding ahead, that offer is extraordinarily valuable. The only requirement is to take it.