Does It Matter Where I Have My Roth IRA?
Saving in a tax-advantaged retirement account is one of the best ways to build wealth over time. A Roth IRA is type of individual retirement account that offers special tax advantages. The basic laws that govern Roth IRAs are the same regardless of where you open the account, but the investment vehicle you choose affects your account management, your investment options, plus costs such as fees and commissions.
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Roth IRA Basics
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A Roth IRA is a retirement account that individuals can open with financial institutions including banks, mutual fund companies and brokerage services. Unlike traditional IRAs, the money you put into a Roth IRA is not tax deductible, but your account grows tax free and you can withdraw the money in your Roth IRA during retirement without paying any income tax. The annual Roth IRA contribution limit was $5,000 in 2010, or $6,000 for those over age 49.
Commissions and Fees
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One of the main reasons it matters where you open a Roth IRA is that banks, mutual fund companies and brokerages have different fee and commission schedules that can impact your ability to build wealth. Some companies may charge annual account fees that they automatically deduct from your IRA balance. Financial institutions may also charge commissions each time you buy or sell assets in your account. Opening an IRA with a company that charges low fees and commissions can allow for better growth.
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Investment Offerings
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Another reason it matters where you open an IRA is that the institution where you open your account may place limitations on where you can invest your money. For instance, a mutual fund company might make it easy for an IRA account holder to invest in the funds the company manages, but it might not allow account holders to invest in mutual funds managed by other companies, or it might make it more expensive to invest in such funds.
Managing Your Account
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The place where you open your Roth IRA determines how you access information about your account and how you can manage your account. Some companies allow clients to manage accounts online and to receive online statements.
Considerations
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The assets you invest in are likely to have a larger impact on the balance of your Roth IRA than the financial institution where you decide to open the account. But finding a company with a reasonable fee and commission schedule, flexibility and good customer service may improve your experience and your ability to create wealth.
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