Most experts agree that one of the best choices for retirement investments is a Roth IRA account. It offers the ability to defer taxes while investing for long term growth, giving the investor the best of both worlds. The problem arises in figuring out how and where to begin.
A quick search will reveal that opening a Roth IRA is simple. You just fill out a form and make a contribution. Deciding where you want to open your account is more difficult.
Each person’s situation is unique. Where one wants safety, another may be more interested in higher returns. Different investment vehicles offer combinations of both in varying degrees.
Some people want to choose their own investments and only want a financial institution to act as a custodian for their account. Others, without the knowledge or inclination to do their own investment research, want the guidance of experts.
You must decide what it is that you want. Once you have made this decision, your next step is to choose a company to handle your funds. For the inexperienced investor who wants the experts to choose his investments for him, mutual fund companies are probably the best solution.
While most mutual fund companies promise low commissions and low expense ratios, not all are the same. Each has it’s own rules for minimum investment and the number and types of fees charges for the service rendered. Research is needed to find the one that is the best fit for you.
The more sophisticated, do-it-yourself investor who wants to maintain control over his assets will be more comfortable with a full service brokerage firm. If this is you, before you sign, you will want to ask prospective companies the following questions:
• Do you require a minimum deposit?
• Do you charge any maintenance fees for IRAs?
When you have narrowed the choices down to those who answered “no” to both of those questions, here are some other questions to ask the broker:
• Do you have local branches?
• What are your costs per trade?
• Are your trading fees on a sliding scale or a flat fee per trade?
• Do you offer ETFs? If so, are they commission free?
• Do you offer a free trading period?
You might also consider a combination of both a mutual fund and a discount brokerage firm for diversification. You can find free Roth IRA comparison tools online to help you make your selection.