An Individual Retirement Account, or IRA, is held as a tax-deferred or tax-free investment by a custodian or trustee. Many different financial institutions are able to serve as trustees. Most banks offer IRA services, and brokerage firms and mutual fund companies do so as well. Your decision of which type of trustee to open an IRA with comes down to many different factors, such as ease of investment, required minimums and fees. Risk of loss is also a factor with many.
You can open an IRA at banks, credit unions, brokerages and other financial institutions. Pick one that offers investments you want at a level of fees that makes sense for you.
Open an IRA Account
Unlike work-based accounts like a 401(k) or 403(b), you can open an IRA at the financial institution of your choice. Big name banks and brokerages offer them, so you can open a Chase IRA or Wells Fargo IRA if you choose, or open an account at a smaller local institution.
Banks offer traditional choices for investments in an IRA, such as savings accounts and certificates of deposit, with brokerage firms and mutual fund companies offering individual mutual funds or stocks. Many banks have expanded their offerings into brokerage services, allowing you to diversify your investment holdings at your bank, so even if you know an institution primarily as a bank, you may not be limited in what you invest in.
Bank savings accounts and certificates of deposit traditionally charge low fees. Investment options usually cost more, both in fees on the mutual funds and commissions for investing. The trustee fees may vary between the two, with investment IRAs offering more services charging a higher trustee fee. Some investment IRAs are self-directed, meaning you can choose many non-traditional investments, and these accounts carry the highest fees.
Money invested in bank IRAs with savings accounts and certificates of deposit is FDIC-insured, meaning that the money is insured by the U.S. government up to $250,000 per depositor, per account, as of 2012, against loss in case of bank failure. Investment IRAs in stocks or bonds may lose money and offer no guarantee or insurance against loss.
Banks typically allow a lower or no-minimum investment, allowing you to start an IRA with just a savings account. Many investment IRAs require a higher minimum to open an account, typically $1,000 or more. Some mutual fund companies waive the minimum opening balance requirement if you agree to have regular, periodic investments automatically drafted from your checking account.
Most investment and mutual fund companies have online access, and it is easy to invest with them. However, investing in a bank IRA is as simple as walking in to your branch, sitting with an agent and opening an account. The bank is less intimidating for some. Couple this with the ability of the bank to potentially transition you to investment IRA products when you are ready, and it gives the bank an edge for those who value simplicity and ease of handling their IRA and prefer face-to-face contact.
Remember that you can open multiple IRAs if you choose to do so, or move funds from one institution to another if it's not meeting your needs.
Make sure you follow the Internal Revenue Service rules if you're moving money from one institution to another so you don't owe a tax penalty. If you take possession of the funds for more than 60 days, you generally will. It's usually easier to have one institution send the funds to another.
2018 Tax Law Changes
The 2018 tax law changes might impact your decisions about what type of investments to make in non-retirement accounts, traditional IRAs and Roth IRAs. Many taxpayers will owe less tax on ordinary income as of 2018
2017 Tax Law
Tax rates were generally higher in 2017 and previous years than in 2018.
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