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Smart financial makes all the difference when it comes to having a funded retirement plan when you finally reach retirement age. One way to get your early retirement planning on track is to open up a Traditional IRA or Roth IRA. Some of the contributing factors in deciding which IRA may be right for you may include initial investment, minimum or maximum contributions, fee structure, best IRA rates, investment options, reputable provider, and the option of rolling over existing IRA assets or 401(k)’s. With that said here is what else you will need to know if you are considering setting and investing within an IRA or looking at your IRA conversion options.
Roth IRA or Traditional IRA?
The first thing you need to do is determine what type of IRA you want to open. You can opt for either a traditional IRA or a Roth IRA. Both have their benefits and drawbacks, but the Roth IRA tends to be the most flexible. That doesn’t mean it’s the right fit for your specific situation though. Roth IRAs have income limits, so you’ll need to make sure your adjusted gross income (AGI) is in line with those restrictions.
Finding a Financial Advisor to Open your IRA Account
You’ll need to open an IRA (either a traditional IRA or a Roth IRA) with a financial institution, and there are lots of different options out there. The trouble is that they’re not all the same. Different places have differing requirements in terms of minimum contribution amounts and minimum initial investments. Some assess different fees than others do. You’ll also need to consider the various investment options available through the institution – stocks, bonds, mutual funds, real estate and many others can be good choices, but might not be right for you.
For those just starting out, beginning with one of the larger players in the industry might be a good idea. That’s because they tend to have more financial options to fit a wider range of investing needs than smaller firms might offer. Variety is a good thing. Firms in this segment include Fidelity, T. Rowe Price and The Vanguard Group. Once you’ve decided on a firm, you meet their requirements in terms of initial investment and your broker will walk you through everything else.
However, you could also consider using a discount broker. These firms offer a lower cost to enter and often give you some measure of control over your account. However, you’ll need to do without a few things if you opt to go this route. Discount brokers don’t provide investment advice, so if you’re not confident charting your own course, you’ll have to get that information elsewhere. You’ll also face a wide range of different potential fees, so keep a close eye on them and compare your options closely. Firms in the “discount broker” segment include Scottrade and Sharebuilder, as well as Firstrade. E-Trade is another that has built a reputation for itself.
In comparison to going with a big firm, using a discount broker is the “DIY” solution. It may or may not be right for you, depending on your level of investment savvy and willingness to do research. The actual process of opening an IRA with a discount broker is relatively simple, though. Anyone who’s ever done his or her own taxes can fill out the forms required.
There’s something to be said for both the traditional, broker-assisted method and the newer, DIY discount broker method. However, your retirement isn’t something you can afford to risk, so take your time when deciding which path to follow.