What to Look For When Opening a Roth IRA

by Ryan Guina

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.

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. Learn more about fees and rules to withdrawal from Roth IRA.

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.

Published or updated August 26, 2016.
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{ 19 comments… read them below or add one }

1 Brian

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.


2 Miranda

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. 🙂


3 Ryan

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!


4 Joes Money

Great read!

Ryan, 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!


5 Craig

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.


6 Broke M.B.A.

Hi Ryan,

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.


7 Meghan

I have an employer matching my 401k, but I was also interested in opening a Roth IRA. Would this just be a waste of my time? I already have the max my employer is matching and that is why I was thinking I should open a Roth IRA. Is this a bad idea? Should i just invest more into my 401k?

Thanks for your help.


8 Ryan

Meghan, Opening a Roth IRA in addition to your 401k is a great idea because of the long term tax advantages a Roth IRA offers. For most people it is best to invest with a 401k until they maximize employer matching contributions, then invest in a Roth IRA until they can max that out. If there is more money available for investing each month, then direct that toward the 401k. Best of luck!


9 Kristin

I am interested in opening a Roth IRA and just starting to do a little research. One question I have is, can I invest in an IRA now and still claim it on my 2010 taxes?


10 Ryan

Yes, you can open an IRA and make contributions for 201 anytime between now and April 18, 2011. Any contributions made after that date will count toward 2011 IRA contributions.


11 Kristin

Thanks! I gotta get on it. Do you think it is easiest to open a Roth IRA with the same company that does my 401K?


12 Ryan

If you are happy with the company that manages your 401k and the investment selections they offer, prices they charge, etc, then sure. But most 401k plans have separate account logins than individual accounts, so you may not be able to see both accounts when you are signed in. You have a little time still, so I recommend looking into different options. Here is a list of popular places to open a Roth IRA.

13 Gloria Wressell

I qualify for my school district to match my investment in a retirement fund. I am a teacher but got started late in life. I was self-employed for 10 years and now am in my fifties. I have a representative from ING trying to get me to invest with them. Is this the best company to go with? I have been researching them on the internet and noticed that they may sell their company. I also noticed they are NOT one of the top rated. Money is tight and I don’t want to make any serious mistakes. Any advice you can give me is helpful.


14 Mark

Can I get the tax credit on my 2012 taxes by transferring 12,000 out of my tsp in to a Ira?


15 Ryan Guina

Mark, I recommend speaking with a tax professional before making this move. You can typically only transfer money from your TSP if you are no longer eligible to contribute to it. So if you have left the military or civil service and are no longer eligible to contribute to the TSP, then you should be able to transfer money out of it.

Transferring from the TSP to an IRA may complicate your taxes, depending on the nature of the transfer. Did you contribute to the traditional TSP or the Roth TSP? Will you be transferring the funds to a traditional or Roth IRA?

If you contributed to the traditional TSP, then you already received a tax break when you made the contribution. You would be able to transfer this directly to a traditional IRA without worrying about the tax status. If you transfer a traditional TSP to a Roth IRA, you would need to pay taxes on the contributions since those funds were originally contributed before they were taxed. There may be other tax concerns if you transfer from Traditional to Roth, depending on how much other money you have in your retirement accounts. A tax professional or investment advisor can help you look at your entire portfolio and help you understand the ramifications of making this kind of move. This is one situation where it is worth paying for expert advice. Best of luck.


16 ralph

my wife is 66 yrs old her company is being sold, she has a 401 k with the old employer but the new employer isn’t offering any 401 plan. what do you she do ? a Roth IRA or traditional IRA?


17 Ryan Guina

Ralph, the decision depends on several factors, including current investments, income tax bracket, investment goals, and more. The best I can do is say read a couple articles on the following topics: Roth vs Traditional IRA – Comparing the Most Popular IRA Plans, What to Do With Your 401(k) When You Change Jobs, Should You do a 401k Rollover into an IRA?, How to Roll Your 401k Plan into an IRA.

At this point, if the former employer’s 401k plan will no longer be provided, it will probably be a good idea to roll the 401k into an IRA or another qualified retirement account. This will prevent taxes and penalties for withdrawing the funds. Going forward, you will need to decide how best to continue your investments, and that is where you will want to consider investing in either a Traditional or Roth IRA. I recommend reading the above articles and related information, then checking back in if you have specific questions. Best of luck!


18 Emily

I recently met with a financial planner about opening a Roth IRA. He recommend a front-loaded fund with a 5.75% fee for all new contributions. I don’t mind paying a bit more for expertise but I’m not convinced it’s necessary. Would your recommend I go directly to a brokerage or mutual fund company instead?


19 Ryan Guina

Emily, paying a 5.75% load is extremely high and not worth it in most cases. I had a similar experience when I started investing and it cost me thousands of dollars. You can read more about it here. That experience made me take the time to learn more about how investing works, and why it’s important to avoid as many fees as possible. In my opinion, you are probably better off in the long run if you put your money in a low-cost brokerage that offers index funds and mutual funds with low expense ratios. This will save you thousands of dollars in the long run, and that money will go to work for you instead of being paid for overhead. If you do decide to go with a financial planner, I recommend visiting one that charges an hourly rate, or a fixed percentage, not someone who makes the majority of their money on commissions (the risk for conflict of interest is just too high). Here are some tips to help you start investing. Best of luck!


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