The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: RedMaple on July 17, 2013, 08:31:04 PM
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My company doesn't have a 401k, so I would like to open an IRA. My company does contribute an amount annually to a Schwab account. It seems like a lot of institutions (banks, brokerages, mutual funds) offer an IRA - what should I look for when I review their terms? What fees are considered low, medium and high? I assume the products they offer are different. How else does each institution differ from the next? Can anyone recommend an institution - please explain why you like them.
I plan to contribute $5,500 (the max) as a lump sum before year end, probably would want to manage the account myself (discount broker) - in that I'll invest in target date (set it and forget it) - I assume I should be able to diversify it in other strategies when I feel the need to do so.
The other thing too, correct me if I'm wrong, but I do have the option to switch the institution if I'm unhappy with it, but that would mean that I'd have to realize all of my investments and report a capital gain if applicable. The same would hold true if I change my strategy.
And finally, correct me if I'm wrong I would have to open another brokerage account for the rest of my money. The difference between an IRA and a brokerage account is that brokerage account will have more exotic products available, but they won't be as tax efficient as an IRA.
2013 goal is to open 529 Plan followed by IRA. If there is enough time, I'll open a brokerage account as well... but I think I'm jumping ahead of myself. Thanks for reading.
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The other thing too, correct me if I'm wrong, but I do have the option to switch the institution if I'm unhappy with it, but that would mean that I'd have to realize all of my investments and report a capital gain if applicable.
IRA's can be rolled from one institution to another without reporting any capital gains. Just contact the new institution and ask them to make the transfer. I've done it twice.
Vanguard. Land your money there.
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+1 on the Vanguard recommendation. IMO, they are the best-cheap, extensive choices, great website, good customer service
You don't have to have the entire $5500 to do the Roth IRA account; I would start now and do monthly deposits to Vanguard. Usually, the best plans made are the plans implemented. Also, Vanguard does 529 plans. There is great convenience in having your accounts consolidated.
I would find out the specifics of the company Schwab account. It could be a profit sharing plan or who knows what.
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Picking up on a discussion in another thread: Note that many custodians charge a $50 fee to cover the costs associated with legally-mandated reporting when a retirement account is closed. Many better brokerages are willing to credit you for that fee when you roll those assets into one of their accounts. (I had an IRA at Wachovia, and Wachovia did charge me a $50 fee to close that account, but Fidelity credited me the $50 because I rolled the IRA into Fidelity.) So be sure to check whether there is a fee, and whether your new custodian will credit the fee back to you once you've given them proof that your old custodian charge it - if the $50 fee may affect your decision to do the rollover.
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+1 for a Vanguard. Just last year when I opened my Roth IRA I maxed it out with the 5,500 contribution. You have until tax time the following year to do this. Once that is done you can take that amount and divide it the the remaining months of the year and then divide that by the number of paychecks you receive in a month to get your bi-monthly deposit amount for the rest of the year. Then it becomes an automatic bi-monthly investment where your sure to take advantage of dollar cost averaging!