If you want to make a withdrawal before you're 59 and a half, you'll have to pay a 10% tax penalty. On the other hand, you must begin to takerequired minimum distributions(RMDs) after you turn 70 and a half (or 72 if you were born after June 30, 1949) if you have a traditional IRA. This is a minimum amount that you're required to withdraw each year. RMDs are taxed as ordinary income. If you have a Roth IRA, you won't have an RMD.

The only requirement for opening an IRA is having earned income—money you get for work you do. Your total annual contribution is limited to $6,000 for 2021, whether you put it all in one account or divide it between a traditional IRA and a Roth. If you’re 50 or older, you can add an annual catch-up contribution of $1,000. You’re eligible whether you’ve contributed to an IRA in the past or not.

Any amount you earn qualifies, and you can contribute as much as you want, up to the annual cap. But you can’t contribute more than you earn. For example, if you earn $1,800 in a year, that’s how much you can put in. And whether you earn $5,500 or $350,000, the top limit is the same.

If your husband or wife doesn’t work, but you do, you can contribute up to $6,000 for 2021 to a separate spousal account in your spouse’s name. The advantage for the nonworking partner is being able to build an individual retirement fund that he or she owns and controls.

It’s easy to open an IRA. All you do is fill out a relatively simple application provided by the bank, mutual fund company, brokerage firm, or other financial institution you choose to becustodianof your account.

Because IRAs are self directed, which means you decide how to invest the money, you’re responsible for following the rules that govern the accounts. Basically, that means putting in only the amount you’re entitled to each year and making approved investments. You must also report your annual contribution to a traditional IRA to the IRS, on Form 1040 or 1040A if it’s deductible and on Form 8606 if it’s not.

You can invest your IRA money almost any way you like that’s available through your custodian, from putting it in savings accounts to buying volatile options on futures. The things you can’t choose are fine art, gems, non-US coins, and collectibles. You can buy and sell investments within your IRA and reinvest the money whenever you please without worrying about paying tax on any gains. But you may pay sales charges and other fees on those transactions.

You have until April 15—the day tax returns are due—to open an IRA and make the deposit for the previous tax year. If April 15 falls on a Saturday or Sunday, your deposit is due by Monday, April 16 or 17, or sometimes as late as April 18.

You can put money into your IRA in a lump sum, or spread your contribution out over up to 15 months. You may put in the whole amount the first day you can, January 1 of the tax year you’re making the contribution for. Or, if you’re like most people, you’re more apt to make the deposit on the last possible day, which is April 15 for the previous tax year.

The most practical solution may be weekly or monthly contributions, perhaps as direct debits or electronic transfers from your checking account. There are no guarantees when you invest this way, any more than there are when you invest a lump sum. You could lose money, especially in the short term. But if your investments do well, adding to them regularly can give your account value a real boost. And the longer money is invested, the more it has the potential to grow.