Individual retirement accounts (IRAs) are a popular investment vehicle for individuals as well as married couples. There are several different types of IRAs available from which to choose.
While there are many options when selecting an IRA, two of the more popular choices include a traditional IRA or the Roth IRA. Both retirement accounts offer unique benefits as well as what some might consider drawbacks, therefore it is important to research all of your options before making your final decision.
Here we look at the Roth IRA and how you can open this type of account. We’ll also look at the best places to open a Roth IRA for no fee.
What is a Roth IRA?
To determine if the Roth IRA suits your individual investment and retirement goals, you must first understand how this type of account works. The Roth IRA allows your money to grow in a tax-free status due to the fact that unlike the traditional IRA which is tax deductible, contributions made to a Roth IRA are taxed at the time of contribution. This means that any money invested in your Roth IRA account will be free of taxation as long as distribution rules are met. A contributor may withdrawal contributions at anytime without paying income tax, while both contributions and earnings may be distributed without taxation once the account is at least five years old and the account holder has reached age 59 1/2.
The Roth IRA is ideal for individuals or married couples that want fewer distribution restrictions as well as anyone who anticipates being in a higher tax bracket at retirement age.
Where is the best place to open a Roth IRA?
You can open a Roth IRA in several places such as a bank, credit union, mutual fund company, brokerage firm and insurance company. Despite the fact that there are literally thousands of providers from which to choose, deciding where you open your account may be determined by your investment strategy.
It is also important to determine how much it will cost to open and manage your account. Startup and annual maintenance fees as well as fees associated with changing your investments or the withdrawal of money can add up quickly, therefore many people prefer what is called a no fee Roth IRA.
In all honesty the likelihood of finding any IRA account that is completely free of fees throughout the entire life of the account is close to impossible. But there are no fee Roth IRAs which basically have very minimal fees that do not have such a significant impact on your account. The key to finding low fee or no fee accounts is carefully comparing all of the providers available.
In most cases to avoid the fees, brokerage companies and mutual fund companies require a minimum deposit or investment. Others may require a minimum amount to be automatically debited from your bank account each month.
Need to open an IRA? Here are review posts on your options as well as links to open an account:
Once you have decided the Roth IRA is right for you, review and compare several companies to ensure you are working with the right provider. This type of investment strategy is an excellent option for those looking to save for retirement in a tax free account.