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You can open an IRA with many of the top brokerages. Here’s what to watch out for when you’re choosing one.
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If you want to invest for retirement, an IRA could be a good account to use. An IRA allows you to deduct the amount you invest from your taxable income. So if you make $40,000 and invest $5,000 in an IRA, you would only be taxed on $35,000.
Another big benefit of an IRA is that you don’t need an employer to offer one. You can open an IRA with a brokerage firm regardless of whether your company offers a workplace retirement plan. Although, you will generally want to max out any 401(k) match your company provides before doing so; otherwise you’d be passing up free money.
The big question you may have is whether you can open up an IRA with any brokerage firm.
Can you open an IRA with any broker?
IRAs are a very common type of account. Pretty much every online broker offers them, as well as many other financial institutions.
In most cases, the accounts come with no fees, so it will not cost you anything to open your IRA. And most brokers offer both traditional IRAs and Roth IRAs, so regardless of what kind of IRA you want to open, you will be able to find a brokerage firm that will allow you to open your account.
The process is generally as simple as providing your personal information, selecting the kind of IRA you need, and providing instructions for how to fund your account. When possible, you may want to sign up for automatic transfers of funds from your checking account so you can invest regularly in your IRA to maximize the chances of ending up with the nest egg you need for a secure retirement.
How to pick the right broker for your IRA
There are a few steps you should take when deciding on a broker for your IRA.
Decide what kind of IRA you want to open
Traditional IRAs come with an upfront tax break in the year you contribute. Roth IRAs don’t, but you can make tax-free withdrawals when you are a retiree while you’d have to pay income taxes at your regular rate on distributions from a traditional IRA. If you expect to be in a lower tax bracket in retirement, a traditional IRA would be the best option in most cases. If you think your tax bracket will be higher, you should choose a Roth and save your tax break until you’re a senior.
Consider the features most important in a brokerage firm
Different brokers have different strengths. For example, Robinhood is great for mobile trading and for beginners who want a simple trading platform. Fidelity offers a solid selection of ETFs, while E*TRADE offers thousands of no-load mutual funds. Decide what types of assets you want to invest in and what kinds of screening tools and educational materials you want available.
Research brokerage firms
You’ll want to look for a broker that has a solid reputation for providing the features and services that are important to you. You’ll also want to make sure the broker doesn’t charge any fees for an IRA or any trading commissions.
By going through this process, you can find the best IRA for you from one of the many brokerage firms that offer these accounts — and you can make sure you’re on track to be financially secure in your golden years.
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