Where is The Best Place To Put Your Precious IRA?
Let’s get one thing straight from the start, nobody is as interested in your individual retirement account as you are. If you imagine that you can place your hard earned money with a broker or finance company and forget it, then you are simply not taking control of your own destiny. When the stock market next crashes (and it does so with frightening frequency) you should not cry foul. The best place to put your precious IRA funds are within your own control. This means a self-directed 401k and or a Roth IRA that YOU actively understand if not manage.
The first things you need to understand are the differences between a traditional IRA and a Roth. Both are excellent ways to save and invest for a good retirement income but the traditional IRA defers tax when you make contributions whereas the Roth is tax-free at the time of withdrawal. There are also income restrictions on the Roth because it is only open to single tax filers earning up to $95,000 per year. Both types of IRA are simple and quick to sign up for and this can be done at any bank or brokerage. Do not go for the most local or the first IRA management company that you see. Like any product or service it is important hat you know your own requirements and shop around.
You must make yourself familiar with the fine print in any IRA contract in order to receive the best IRA rates. Internet research, shopping around and talking to people at or near retirement will ensure you get the customer viewpoint. Most IRA companies will offer conventional low-risk stocks and bonds as investment vehicles. The more exotic the investment vehicle the higher will be the fee, for real estate securities for example. The best companies also put their money on the line with guarantees of minimum returns.
Some good and well-known IRA companies and their key features are as follows:
- T.Rowe Price. These do not charge commission when you buy their own funds and have a minimum opening balance of $1000.
- ING Direct have no minimum opening balance and a $9.95 commission with each trade.
- Vanguard, have a good range of index funds, a minimum start balance of $3000 and no account fees with electronic statements.
- Zecco Trading. First 10 trades are free, no minimum start amount but a $30 annual IRA fee.
- Trade King. $4.95 per trade. No minimum opening amount and no annual fee.
Search for the IRA caretaker company that offers the full range of investments allowed under the ERISA law. Search too, and compare charges, set-up and annual maintenance fees. Companies that levy extra fees for every transaction will take their share of your profits and thereby reduce the value of your IRA.
Of course keeping control of your IRA by investing in a self-directed one will ensure that all the fees come to you instead. So it is a worthwhile investment of your time to learn all you can about different investment options. If you don’t know anything about real estate investing or stocks and are unwilling to control your own finances then by all means seek the help of a company that specializes in managed IRA’s and real estate investing. Many of these companies will offer complete real estate services that include property management and full disclosure.
It is true for all investments that the best IRA rates of return go hand in hand with higher risks. But real estate is very safe because it is just that, real. There is a requirement on you to do ‘due diligence’ which is just a fancy word for common sense.
Most people start out with a Roth IRA, since starting out normally means you are in the lower tax brackets and these save you taxes upon withdrawal. Finding a broker or bank to look after your nest egg is a very important personal decision and you should take time to look for and understand such things as investing in low-cost funds or Exchange Traded Funds, ETF. Look first and foremost for low commission costs and account fees. Basic services at a good price means more of your money comes to you.
If you are not going to be an active independent investor you should pay for good advice. It is still recommended that you take the time to learn the basics, and set up an institutional account in which the experts can trade on your behalf. But if you are only just beginning to save for your retirement you have something between $50 a month and $5,000 to put into an IRA. So you may be more concerned about minimum open balances rather than eligibility for the premium accounts.