The other day on our Discount Brokers discussion board, Fool community member Wabash02 (a.k.a. Jim) asked a good question: "I am looking for an online brokerage to open a Roth IRA in. I have gone through the posts on this board over the past year or so and have gotten a decent idea of what Fools like/dislike, but I want the most up to date info -- that's why I'm posting. I will say that the posts [I've read] . have been very helpful in evaluating brokers for a taxable account."
Jim went on to offer some details about himself (he's a professional bond trader, for example) and his financial situation. Because he plans to contribute to the account each year and perhaps trade three to five times per year, he's paying close attention to commissions and inactivity fees. He said he was a bit wary of TD Ameritrade
As is often the case on our discussion boards, Jim got an eyeful of responses from helpful folks. Read the whole discussion here, or just peruse the snippets below:
Patzer offered a very thoughtful response, saying, "Whatever broker you settle on, it will probably be to your advantage to have the traditional IRA and the Roth with the same broker. You get the same commission structure. You're a bigger customer, so if fees are waived or commissions are reduced for having more assets, you may get by cheaper based on the sum of the assets in the traditional and Roth IRAs." For many people, this makes good sense. I'd add that it might also be the same brokerage where he maintains his regular, taxable investment account.
Patzer then added, "But the big reason is Roth conversions. Given a volatile income, it may make sense for you to do Roth conversions [converting your traditional IRA into a Roth one] in years you are eligible to do so. Having the traditional and Roth IRAs in the same place should make this administratively easier. And if you end up having to recharacterize a contribution, you have a ready-made traditional IRA for the recharacterized amounts to land in." (Read more about conversions.)
IndecisiveFool recommended Scottrade as a good brokerage, citing no annual maintenance fees and low $7 trading commissions. KenAtPcs cautioned that there are some "unhappy campers" among Scottrade customers and linked to our Scottrade discussion board. (I'll note here that most brokerages have their fans and critics, though in varying degrees.)
The conversation continued, with more recommendations and some disagreements. Read it all if you'd like, or perhaps explore our IRA Center for more information on Roth and traditional IRAs.
If you'd like to see some information on several key brokerages that sponsor The Motley Fool, stop by our Broker Center, which offers tips on how to find the best brokerage for yourself. It also features a handy comparison table. (Did you know that some brokerages offer stock-trading commissions of less than $5?)
You might also want to simply poke around the websites of some contenders for your investing business, such as Fidelity, E*Trade
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.
