Individual Retirement Accounts (IRAs) are a great way to invest for retirement because they give you the opportunity to invest your money with tax advantages that are more beneficial than investing in a non-retirement account. You can open a Roth IRA at many financial institutions, which is convenient for investors. But each financial institution is not created equally and every investor has different needs, so it pays to do your research before jumping in with both feet. You should assess your investment style and needs before opening a Roth IRA or making any other investment.
What to look for when opening an IRA
Where you can open an IRA
Many financial institutions and brokerages offer IRAs, including banks, brokerage firms (Merrill Lynch, Edward Jones, etc.), online discount brokerages (Scottrade, E*Trade, TradeKing), mutual fund companies (Vanguard, Fidelity, T. Rowe Price), and independent certified financial planners. You will want to find the financial institution that best meets your investment needs.
If you prefer speaking with someone face to face, then you may wish to go with a full service broker that has an office where you can discuss your investment needs. If you prefer a more hands on approach you may wish to go with a mutual fund company where you can invest in a variety of mutual funds and other investments, or an online brokerage where you can make inexpensive individual stock trades. If you like a combination of these features, then consider a company like Scottrade, which offers a discount online brokerage, and also has individual branches where you can meet with a broker to discuss your investment needs.
Best places to open a Roth IRA. Here are some of the more popular places to open a Roth IRA.
Questions to ask before opening your IRA
- Is there a minimum initial investment to open an IRA?
- Are there minimum contributions?
- What types of fees are charged and how much are they?
- Can fees be avoided with minimum account balances or by receiving electronic statements?
- Does the company offer option to make automatic contributions?
- Which investment options are available? Stocks, Bonds, Mutual funds, ETFs, CDs, other?.
You should be able to get the answers to most of these questions online, unless you are opening an account with an independent financial planner, who may or may not have this information online. If the information is not readily available online, give the financial institution a call and ask for an information packet before opening an IRA. It’s a good idea to review the fees and other details prior to opening your IRA; that way you have a good idea of what kind of fees and other expenses you can expect to pay.
All things being equal, go with the company or broker you feel most comfortable with. And if you later decide that you don’t prefer the financial institution where you opened your IRA, you can always transfer it to another financial institution. The brokers there will be happy to help you fill out the paperwork.
{ 6 comments… read them below or add one }
I recently was looking to rollover an IRA and my old 401k to a Roth. I found out the discount brokerages want me to put the money in a Rollover IRA first and then convert it to a Roth. The brokerage with cheaper trades charges $50 for this. The other brokerage has no charge. Fees like that could really offset the cheaper trades.
We made the mistake of opening our Roth IRA with our insurance guy. There was no load fee, but the admin fees were higher than we would have liked. It’s what comes of being young, just married and having no clue.
The good thing is that you got started young, which many people don’t think about or are too intimidated to do. The other good thing is that it is easy to transfer an IRA to another institution.
I made the mistake of opening an IRA with a huge front load and high expenses. A couple years later I learned why that wasn’t a good option and moved my IRA to another institution, which was painless. I was out the money for the load I paid, but the fund I chose had much lower fees. I learned from that experience!
Great read!
Patrick, exactly! At least they had enough sense to start a roth at a young age. Better to have higher fees than anticipated than to have not roth at all.
Great tips for fitting into a good Roth!
I ended up going with Vanguard and starting my account knowing nothing about IRA or retirement funds, the account manager and customer service were excellent. They spent 30 minutes on the phone with me answering my very basic financial questions and explaining the whole process. I felt comfortable enough to begin and transfer money over. Customer service is the key, you don’t need to have it face to face if you don’t want.
Hi Patrick,
You’ve just touched on something that has been on my “to-do” list for a while now. I have a Roth IRA with ING/Sharebuilder. I signed up in 2006 at the age of 23, but didn’t take the time to compare fees and costs between companies or brokers. It’s nice to hear that I’m in good company and that it’s very easy to switch financial institutions if necessary.