How to Open a Roth IRA
If you satisfy the Roth IRA eligibility rules, then the next step is to open a self directed Roth IRA account and start taking advantage of those tax free savings. You have the option to open a Roth IRA at a brokerage firm (either brick and mortar or online), directly at a mutual fund company (think Vanguard) or at a local bank. Many people confuse the Roth IRA as an investment and want to know what the rate of return is.
Where to Open a Roth IRA
You need to keep in mind that a Roth IRA can be invested in stocks, bonds, or in a Certificate of Deposit (CD). Your investment options greatly depend on where you open your Roth IRA. Opening it at a discount brokerage firm often gives you the most flexibility as most discount brokers allow you to invest your Roth IRA in stocks, bonds or ETF’s. You can easily calculate the tax advantages of traditional and Roth IRA’s using personal tax software. There are also affordable options available online to assist in organizing an investment portfolio, such as Quicken and Mint.com. Be sure to double check what the custodial fees are. It will usually run you about $50 at a brick and mortar brokerage firm compared to $10 or less online.
Opening Roth IRA at Mutual Fund Directly
Also, keep in mind that if you open a Roth IRA directly at a mutual fund company you are limited to that company’s mutual funds. Company’s like Vanguard or Fidelity aren’t as bad because you have several options to choose from. But are they the best place to open a Roth IRA? Be sure to check to see what options you have in case you ever wanted to switch from aggressive to more conservative.
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