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Quest Trust Company›Blog›opening an IRA account

Tag: opening an IRA account

Important factors to consider when selecting an IRA custodian

Posted on November 8, 2019December 23, 2020 by Quest Trust Company
Estimated reading time: 2 minutes

There are different types of IRA accounts, for instance, Traditional IRA, Roth IRA, and SEP IRA. However, all IRAs have something in common. According to the Internal Revenue Service, all must have a custodian.

Who is an IRA custodian?

An IRA custodian refers to a financial institution that is responsible for holding account investments. The custodian ensures investment accounts are safely handled, and both the government and IRS regulations are followed.

There are numerous custodians in the market. While they are not hard to find, how do you single out the best IRA custodian for you? Here are essential factors to consider:

  1. Available investment options

  • Always choose a custodian with a wide range of investment options.
  • Sometimes your investment needs may go beyond those of an ordinary IRA account. Will your custodian be able to handle that?
  • Your custodian should be someone you are willing to trust with most, if not, all of your investments and financial services.
  1. Charges

  • Fees come in different forms; they could be annual account maintenance charges or commissions on trades.
  • Different custodians charge different prices. Thus, the costs depend on your custodian and account size.
  • Maintenance fees always depend on the custodian. So make sure you ask a potential custodian how much they charge.
  • Some custodians may waive the annual fee for customers whose accounts exceed a specific amount. Or depending on how much you have invested with them.
  • Also consider transaction costs charged when trading stocks, closed-end funds, and ETFs. Some custodians offer lower commissions than others while some impose charges on transactions for mutual fund families. In other cases, your transactions will not include any fees.
  1. Complex transactions

  • Make sure your custodian is well equipped to handle complex transactions.
  • While your account will start with straightforward investing like stock purchases,  with time, your needs may grow and you might seek other investment opportunities.
  • Some investments have complex rules surrounding them. Choosing a custodian without the necessary skills to handle complex transactions may cost you a fortune in terms of penalties and taxes.

Consider the above factors in your search for the right custodian. Remember, your custodian will be in charge of your retirement savings and investments. Contact a Quest IRA Specialist for further guidance to ensure you make the right choice. At Quest Trust Company we help you take control of your retirement.

Posted in IRA Education, IRA Investments, IRA Qualifications, Opening an IRATagged IRA Education, Ira Investments, IRA Qualifications, opening an IRA accountLeave a comment

Opening an IRA for the First Time

Posted on March 31, 2017April 13, 2021 by Juan Deshon
Estimated reading time: 3 minutes

Most people know they should be saving for retirement, but either feel they don’t have enough in their budget right now to contribute or don’t know where to start. Some companies offer employees a retirement option called a 401k, where the company will typically match the contribution of the employee up to a certain percentage of their paycheck. Another retirement option you can take advantage of with or without a 401k is called an Individual Retirement Account (IRA). You won’t be able to contribute as much to an IRA as you would to a 401k, but IRAs aren’t tied to certain companies. Anyone with an income can open an IRA, but there are still contribution limits, tax credits, and withdrawal rules associated with these types of accounts, just as with 401k accounts.

IRA or 401k?

            If your company offers 401k plans, most financial advisors would recommend contributing to those types of accounts first because of the company match option. You will want to contribute up to at least that match offer because it’s basically free money you get for retirement. Why not take advantage of free money? IRAs, however, have a much lower contribution limit at $6,000 (or $7,000 if you’re older than 50). If you can contribute to both types of accounts, ask your financial advisor what would be more advantageous for you based on your age, your retirement goals, and the benefits and fees of each type of account.

Traditional or Roth?

There are two basic types of IRAs—Traditional IRAs and Roth IRAs. Both have the same annual contribution limit, but differ in qualification factors, tax benefits, and withdrawal rules. With a traditional IRA, anybody can contribute as long as you have an income to be able to. You may also have the ability to write off all or part of your contribution on your taxes depending on your income level. However, you will have to pay income tax on your distributions once you start using the money for retirement. With a traditional IRA, you must take your first distribution by 72, but you can begin to take distributions at age 59 ½ without penalty. For Roth IRAs, you may be able to contribute the full limit or part of the limit depending on your income. Typically those with low income now will contribute to a Roth IRA instead of traditional. While you won’t receive a tax benefit up front contributing to a Roth, your distributions will also be tax free when you’re ready to withdraw. As long as your account has been actively open for five years or you’ve reached age 59 ½, you may withdraw funds from your Roth IRA with no penalty.

Opening an account

When you are ready to open your own retirement account, take into consideration cost of fees, minimum investment amounts, how the account is managed, and what types of investments you want to contribute to. Some options will charge a set-up fee up front, while others may only charge commission on profits. If you prefer person-to-person contact with your account manager, you may want to sign up with the account that offers in-person advice. If you trust computer algorithms to handle your financial decisions, you can choose a robo-advised account and typically pay a much smaller management fee. Lastly, some investment options are inherently more risky, such as individual stock options, while others tend to be on the safer side, such as bonds and mutual funds. A diversified account is always smart, but the ratio of risky to safe investments will depend on your age, your retirement goals, and how well you can handle market turbulence. Usually younger investors will include more risky options, while those closer to retirement will want to stick to the safer side of things.

There’s a lot of information out there regarding retirement accounts and how to best save using them—it can feel overwhelming! The worst choice you can make is avoid deciding on a retirement account and end up not saving at all. Talk to your financial advisor today to get started investing into your future.

Posted in Opening an IRATagged opening an IRA account, Roth Ira, Traditional IraLeave a comment
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