How to Start Saving for Retirement With Just $50 and an IRA

If you've hesitated to start saving for retirement because you think you don't have enough money, relax. You don't need thousands of dollars to open an individual retirement account (IRA), one of the best vehicles available for building a nest egg. In fact, you can get started with just $50 at a bank, online brokerage or mutual fund company.

Financial firms love IRAs because they tend to stay in one place. And most are happy to accept low initial investments, especially if you agree to add to them monthly.

Many choices

Ariel Investments, a mutual fund company in Chicago, requires $1,000 to open a regular taxable account in its flagship stock fund, the Ariel Fund. To open an IRA, though, you need only $50 and an agreement to keep adding funds — called an automatic investment plan (AIP) — until you reach $1,000. USAA's AIP will let you enroll in mutual funds with $50, as will Artisan Partners’ AIP.

What's more, many discount brokerages will let you start an IRA with very little cash. Charles Schwab, for one, will let you open an IRA for any amount. Similarly, E-Trade has no account minimums, nor does TD Ameritrade or Fidelity Investments.

"Saving for retirement doesn't have to be overwhelming, and small steps now can bring big savings in the future, which is why we offer retirement accounts with zero minimum balances and zero annual account fees, with a range of investment options,” says Melissa Ridolfi, vice president of retirement and college planning at Fidelity.

If you invest in a discount brokerage, you have a wide array of mutual funds from which to choose. Not all of them will have the same minimum investment. For example, if you want to buy the Vanguard 500 Index Fund Admiral Shares through Fidelity, the minimum initial investment is $2,500 — and you'll pay a $75 fee to buy shares. But don't be discouraged, as you'll be able to search for funds on the brokerage site that fit your budget for initial investments, even if your budget is a mere $50.

You can also buy low-cost exchange-traded funds (ETFs), which are funds that trade during stock exchange hours the same way stocks do. ETFs and mutual funds typically hold a basket of investments, so they tend to be more diversified and less risky than a single stock. In most cases you just have to figure out how many ETF shares you can afford. If you have $50, you can buy five shares of an ETF whose price is $10. To stretch your savings, be sure to invest in funds that don't charge a trading commission. Many accounts at discount brokerages offer commission-free trading.

Of course, you can also open an IRA at most banks and credit unions. Bear in mind that current interest rates are extremely low and you'll have to shop carefully to find a savings account or certificate of deposit that yields more than 1 percent a year. You can shop online at Bankrate and NerdWallet.