Where should I open an IRA?

Once you know what kind of IRA you can open, decide where to open your account. Some of your options include the following:

Online brokerage firm:

Online brokerage firms allow you to invest in a mix of assets, including stocks, bonds, mutual funds, and ETFs. Many online brokers allow you to open an IRA for free. To pick one, read our complete guide to how to choose an online brokerage. Essentially, you'll want to look for a broker that provides access to a mix of different investments and charges a low commission for buying and selling assets.

For most people, an online brokerage firm is the right choice. With an online broker, you have flexibility in what you can invest in and can get your money into the stock market -- which has consistently and reliably provided the best returns on investment over time with reasonable risk.

Full-service broker:

Full-service brokers also allow you to invest in a mix of different assets but manage money for you or provide more help in choosing investments. The big downside is that they're often very expensive. You may have to pay high commissions and management fees. Many also require a pretty high minimum balance.

Robo-advisors: Robo-advisors are relatively new to the financial scene. Essentially, you put your money into an account and answer a few simple questions, and a computer algorithm determines how to allocate your money. You don't have to select investments, so you can be very hands-off. But you'll pay a fee. While you pay less than you would with a full-service broker, even tiny fees can ravage your retirement savings.

Paying a robo-advisor may not be worth it, considering you don't really need one when you can easily build a diversified portfolio by investing in ETFs. Some of our model portfolios can help you get started.

Peer-to-peer lending networks:

Peer-to-peer lending networks allow you to invest in loans made to other people. You can choose loans based on parameters including the borrower's credit score and payment history. Many peer-to-peer networks also offer automated investing options, where your money is invested in a portfolio of loans for you.

For most people, investing in the stock market makes more sense. But if you want an alternative investment and/or have a lot of money invested in stocks elsewhere, such as in an employer 401(k), this may be an option worth pursuing.

Banks or credit unions:

Some banks or credit unions allow you to open an IRA. However, investment options are usually limited to money market accounts, certificates of deposit, or similar investments. You may find you can't build a very diversified portfolio or earn a very good rate of return.

Mutual fund companies: Some mutual fund companies allow you to open an IRA directly and put your money into their funds. Your money is pooled with the cash of other investors and used to buy a mix of investments. You may have to pay fees, including management fees.

You can also invest in mutual funds through an online brokerage account -- and are probably better off doing so because you won't be limited to one company's funds.

How can I open an IRA?

Once you've decided where to open your IRA, you'll need to complete some paperwork. Most IRA providers allow you to do that online in just a few minutes. Typically, the process involves the following:

• Select your account type:

  Almost all brokers offer traditional and Roth IRAs. If you want to open a SIMPLE or SEP, make sure your brokerage allows it and find out if there are fees.

• Ask about minimum investment requirements:

  Some have none. Others require you to invest at least $1,000 or at least $5,000. Make sure you have enough money.