Shopping for an IRA

Answer 1

So if you have a 401(k) from an old job that you’ve left you may be thinking about rolling that account over into an IRA. You may have looked around at different IRA accounts here and there and been left wondering what the major difference is between the different accounts at the various institutions. If you find yourself in the situation of shopping for the best IRA, then read on. You may be interested to learn that, for the most part, an IRA at one institution is nearly identical to an IRA at another. All IRA accounts are regulated by the same sets of rules after all. Where you will find a difference is in the investment options available to you within the different accounts. An IRA through a mutual fund family, for example, will usually offer shares of their funds for your investment purposes within the account. You won’t be able to invest in their competitors funds, however, unless the account is through the fund family’s brokerage arm and the account allows it. IRAs at banks often are limited to investing in CDs or savings bonds only. You can sometimes invest in mutual funds in a bank IRA, if (and only if) you open an account at the bank’s brokerage arm and the account allows it. Insurance companies will sometimes offer IRAs in which you can invest in various mutual funds if the IRA is opened at the insurance company’s brokerage arm. Sensing a pattern here? Deregulation of the financial services industry has seen firms that used to look very different from one another starting to look very similar indeed. So what do you do if you want to invest with a specific mutual fund family in an IRA? Should you go to a bank brokerage account? Or an insurance firm’s brokerage account? Or a traditional brokerage house? Well in all honesty, you’re probably better off going directly to the mutual fund family and opening an account with them. If they are operating in your best interests the fees you are charged (those you see and those you don’t) will be less than the fees you’d pay if you went to the bank’s brokerage and invested in shares of the same mutual fund. The reason is that the bank has to charge you a fee in order to make money, and the mutual fund has to charge a fee too. If you invest directly with the fund family in an IRA, often you’ll come out ahead on the fees you’re charged.