An Individual Retirement Account, or an IRA, is a fantastic vehicle for retirement savings. It is a type of savings account that can help you plan for retirement while also minimizing your taxes. There are two types of IRAs: traditional and Roth. With a Roth IRA, your contributions are made with money that has already been taxed, then all earnings and withdrawals are available to you on a tax-free basis. In a traditional IRA, you pay taxes when you withdraw the money from the account. For both types of IRAs, the contributions grow tax-free; meaning everything you put into the account can grow over the years without you ever paying a penny of taxes on it.
However, there are limitations on how much money you can put into an IRA each year. For most people under the age of 50, you can put no more than $5,500 per year into an IRA. There are also income limits for opening up an IRA, and the money cannot be withdrawn prior to retirement without penalties and taxes.
Overall, an IRA account is an important retirement savings tool that has many advantages for anyone looking to get a head start on their financial security. So what should you look for when setting up an IRA account?
Low or No Account Fees
This is a relatively straightforward feature of an IRA account: if you want to maximize your savings, you will need to minimize the amount that you pay in fees. Over time, these small fees — 1 or 2 percent for a transaction, for example — can really add up. More banks, brokerages and other IRA providers offer either low or no account fees than ever before. Research your options thoroughly and compare fees before choosing an IRA for your retirement savings account.
Large Selection of Funds
When you open an IRA account, you are not simply putting money into an account like you would at a bank. Instead, you’re essentially using it as an investment vehicle, purchasing stocks, bonds, mutual funds, and other assets. There are many different options for how exactly you purchase those assets. One option is to simply select a projected retirement date and the type of growth you want, then allowing the brokerage to choose funds for you. Another is to choose the funds yourself. If you plan to buy and sell funds yourself, then you will want to be sure there is a large selection of funds to choose from — and that you can buy and sell them without transaction fees or commissions.
The reason is simple; if you are hit with transaction fees and commissions for each and every trade you make, then you will soon find your retirement savings dwindling. For anyone who plans to buy, sell and trade funds, having a large selection of no-transaction-fee and commission-free mutual funds is critically important for an IRA account.
Great Customer Service
Let’s face it: most of us are not financial gurus. There are going to be times when we all have questions, and this is when a strong customer service team comes into play. Check into the brokerage’s track record on customer service before signing up for an account. Read online reviews; do you get an actual human, or are you shuffled from one computer to the next? After all, this company is handling your money. It is vitally important you be able to reach them if you have questions, and that they be able to provide answers to your questions.
Investor Education Opportunities
Similarly, if you want to learn more about the financial market and opportunities for investment, the brokerage firm should offer opportunities for you to do so. Does the company have online seminars and other chances for its customers to learn more about how to save for retirement? Is their website user-friendly and geared toward providing information to help their customers learn about investing and retirement? While you may not be interested in learning about mutual funds, stocks and bonds now, there may come a time when you want to and your brokerage firm would be an ideal resource. Compare different companies’ options to see what they offer in terms of educational opportunities.
Low Account and Fund Minimums
Finally, make sure that you are choosing a brokerage firm that actually allows you to invest. Some companies have relatively high initial thresholds for establishing an account or purchasing a fund. This may leave you in the position of waiting to save enough to buy a certain fund, or realizing that many of the firm’s offerings are simply too expensive for you. Review each company’s account and fund minimums before agreeing to start an account.
Once you have opened an IRA, don’t forget to do the most important thing of all: keep saving! By regularly putting money into your retirement accounts, you will be well on your way to a secure financial future.
©2017
The post The Best Things to Look for in an IRA Account appeared first on Lendedu.