How to Compare Roth IRA Accounts
The Roth IRA is a type of individual retirement account in which your contributions grow tax-free. The government sets the rules for Roth IRAs regarding annual contribution limits and withdrawals, but institutions offer different investment options within the Roth IRA guidelines.
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Instructions
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Compare the average rate of return for the Roth IRA. Banks generally offer a lower rate of return because the money is put into a certificate of deposit (CD). This money is guaranteed by the Federal Deposit Insurance Corp. (FDIC) but will not grow quickly. Investment firms offer a wide variety of mutual funds that you can choose for your Roth IRA. These offer a higher rate of return but are more risky.
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Check the fees associated with the Roth IRAs. Administration fees generally are charged each year to mutual fund accounts. Some fees are larger than others. Check to see how often the fees are charged as well.
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Look at the ways you can contribute. You may be able to make automatic monthly contributions to the account directly from your checking account. Other accounts may involve a once-a-year contribution.
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Consider the minimum opening balance requirements. Many investing firms have a large minimum balance requirement, though they may waive the requirement if you sign up for monthly contributions to the account. Banks may also have a minimum investment amount.
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Choose the account that you feel is the best option for you. If you're nearing retirement, you may want to choose an account that offers a lower rate of return in exchange for the security of your investment. If your retirement is more than 10 years away, you may want to consider an account with a higher rate of return and risk. This will allow your money to grow and give it a chance to recover if the market dips.
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Tips & Warnings
The FDIC will protect your Roth IRA in the event of a bank failure only if the money is in a deposit account. If you are using investment services offered by your bank, the money is not guaranteed by the FDIC.
