All About IRAs
How To Open an IRA
It's really quite simple to open an IRA account. Here are a couple of suggestions to help get you started.
Step 1: Find a Discount Broker
If you don't already have one, we suggest that you look into opening a discount brokerage account. Discount brokers are likely to offer the lowest transaction costs, and most offer both Roth and traditional IRAs. In selecting a broker, there are a couple of things to consider:
- Pay Attention to Fees. By law, an IRA trustee (which is what your broker will be) can charge an annual fee to maintain your IRA. Many charge around $30 a year to maintain an IRA, but some do not charge anything (which sounds pretty good to us Fools).
- Consider Trading Commissions. How much are you paying each time you buy or sell a stock? Even if you employ a long-term buy-and-hold strategy, you've still got to fund your account. Make sure the bulk of your contribution is going toward your retirement nest egg, not commission fees.
The reason for such a parsimonious attitude toward your IRA account is that your contributions are limited to $2,000 a year per person. An extra $50 a year in transaction fees will, over time, reduce your account balance by tens of thousands of dollars.
In other words, it pays to shop around. In retirement those fees could mean the difference between serving festive drinks on your beachfront property in Tahiti, or sipping generic beer at your timeshare in Toledo. For those eager to start saving for their slice of retirement paradise right now, we've put together a table that compares brokers in our Broker Center. Compare their fees and services. And if you find a broker that looks good to you, go ahead and open an account or get more information!
Step 2: Open and Fund Your Account
So, you've settled on a discount broker and now you're ready to open your account. In most cases, your broker will have an online application you can complete. Sometimes you'll need to print this form out and mail it in with a check. A few brokers now allow you to complete the entire application online and electronically transfer funds from your checking o