How to open a Roth IRA

How to open a Roth IRA

A Roth individual retirement account (IRA) is a retirement savings option for clients looking for potentially greater tax savings than a traditional IRA offers. Contributions are made post-tax; earnings grow tax-free; and qualified withdrawals and distributions are free of federal income tax if certain requirements are met.

A Roth IRA can be contributory, rollover, or spousal, and it can be funded from your own earned income Tooltip through a conversion of a traditional IRA or qualified plan or through a rollover of Roth contributions from a 401(k) or qualified retirement plan. The 2017 Tax Cuts and Jobs Act eliminates the ability to do a recharacterization (reversal) of a Roth conversion for years after 12/31/17. Contact your tax advisor to fully understand any tax implications before converting.

You can open a Roth IRA using digital onboarding DocuSign® or paper forms.

All processes

A completed IRA Account Application

  • Your firm name and master account
  • Account holder's name, home address, identification number Tooltip , birth date, telephone numbers, citizenship status Tooltip , employment status, and the employer, occupation, business address Tooltip , and business phone number
  • No minimum amount necessary
  • If applicable, account beneficiary’s name, Social Security Number (SSN), birth date, relationship to account holder, beneficiary type, and the percentage share of the account
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website)
  • If the account holder is affiliated with a member firm of an exchange or FINRA and Rule 3210 applies, a FINRA Rule 3210 Consent Letter
In addition to the information above, the following may be required:
Additional features
  • If establishing a Schwab MoneyLink® profile:
    • A completed MoneyLink (ACH) form
    • A valid document from the other financial institution containing the client's account title, account number, account type, and ABA number (e.g., check, deposit slip, statement, or letter on bank letterhead signed by an officer)
  • If adding a power of attorney to the account, a completed Power of Attorney (Individual POA) form
  • If adding options, a completed Options Trading and Margin Application
  • Householding (automatically added)
  • If adding checks, an IRA Checkwriting application is required
    • Prior to adding the checkwriting feature, confirm the client's eligibility.
Account opening method
  • Schwab recommends using digital onboarding for the fastest, most secure experience for you and your clients. For details, see How to use digital onboarding.
  • If using DocuSign to submit forms:
    • For existing Schwab clients, a complete Schwab Advisor Center® profile with the account holder's current email address and mobile phone number
    • For new-to-Schwab clients, the email address and mobile phone number
    • All clients must use text message (SMS) authentication and Knowledge Based Authentication (KBA) for DocuSign

For details on this process, see How to use digital onboarding.

Digital onboarding supports Roth contributory and rollover IRA account open, as well as contribution and distributions set up in a single, end-to-end digital experience for you and your clients. Contributions and distributions include:

  • ACAT asset transfer (TOA)
  • Link external bank account (MoneyLink)
  • Check requests SLOA
  • Internal cash transfers (journals) SLOA

As Schwab transitions from digital account open (single account open with no contributions or distributions) to digital onboarding, you may need to access digital envelopes in two places:

ForSteps
Legacy digital account open envelopes
  1. Go to Account Management on Schwab Advisor Center.
  2. Click Manage Schwab envelopes.
  3. At the top of the page, click Schwab Envelopes for Additional Workflows.
  4. Edit, send, or submit existing draft envelopes.
    • Completed envelopes will continue to be accessible and will expire after 180 days.

Note: For new envelopes, follow the digital onboarding workflow.

New digital onboarding envelopes
  1. Go to Account Management on Schwab Advisor Center.
  2. Click Open and fund an account.
  3. Click Create envelope.
  4. View in progress or completed envelopes via Manage Schwab envelopes.
  5. Review and take action on all digital onboarding envelopes (draft, waiting for client approval, action needed, completed).

For details, see How to manage envelopes.

For details, see How to use DocuSign. Use the Open Account- IRA Accounts form to complete the workflow.

This process may be used to open a Roth IRA using paper forms.

  1. Select the Open Account – IRA Accounts link to open the Forms library on Schwab Advisor Center. Open the IRA Account Application form as well as any other applicable forms.
  2. Complete all applicable fields, and ensure that all additional features the client requested have been added.
  3. Print the forms and obtain signature from account holder. Send the signed form(s) to your Schwab service team via a Schwab Advisor Center service request.

Once you have submitted your request:

  • If the forms were submitted using digital onboarding, see How to use digital onboarding.
  • If the forms were submitted using DocuSign, see the What's next? section of How to use DocuSign.
  • Schwab will send your client standard communications about their Roth IRA once it’s been opened. The account holder should consult with their tax advisor if they have any questions about taxability or filing.
  • If you have questions about opening a Roth IRA, call your service team.

Go to the Forms library on Schwab Advisor Center and select the forms below.

Form: IRA Account Application
Form: IRA Distribution Form
Form: MoneyLink (ACH)
Form: Power of Attorney (Individual POA)
Form: Transfer of Account Form Instructions (TOA / Account Transfer)
Resource: Digital onboarding education

 

Can my client do a partial conversion from a traditional to a Roth IRA?
Partial conversions are permitted. Your client may want to make a partial conversion to avoid the tax expense of a full conversion.

What should I do if my client converted and now wishes to reverse the conversion?
The 2017 Tax Cuts and Jobs Act eliminates the ability to do a recharacterization (reversal) of Roth conversion for tax years after 12/31/17. Conversions completed in tax year 2017 may be recharacterized up until the client's tax filing deadline including extensions. Complete the IRA Recharacterization or Excess Withdrawal Form.

My client must take a required minimum distribution (RMD) from a traditional IRA. Can the account be converted to a Roth before taking the distribution?
No. The RMD is ineligible for conversion and must therefore be distributed before the remaining assets are converted.

Can a minor open a Roth IRA?
Yes. If the minor has earned income, they can open a Schwab custodial IRA account. The account is established as a Roth IRA and is managed by a parent or guardian until the minor reaches the termination age, at which time ownership completely converts to the account holder.

Can my client contribute to a Roth IRA and a traditional IRA in the same year?
Yes. However, the total contribution cannot exceed the annual contribution limit (including catch-up contributions). If your client is ineligible to make the full contribution to the Roth IRA due to the client's modified adjusted gross income, the remaining amount can be contributed to the traditional IRA.

How to add and update account beneficiaries
How to add features to an account
How to convert accounts
How to handle deceased clients' assets
How to open a custodial IRA
How to open an inherited IRA
How to open an IRA for international clients/residents
How to open a traditional IRA 
How to roll over assets to a Schwab account
How to use digital onboarding
How to use DocuSign®
Introduction to custodial IRAs
Introduction to householding
Introduction to Roth IRAs
Introduction to traditional IRAs