The decision to pursue investing in Roth IRAs is one of the best decisions you can make. This article will give you a rundown of the best roth IRA companies for your money, as well as what are some factors to consider before opening an account with any specific company.
Roth IRAs vs Traditional IRAs
Traditional IRA and Roth IRA both offer tax benefits; however, there is an interesting dichotomy between the two that determines which type of account would be better for you:
-If you want a current tax break on your contributions, then go with a traditional IRA.
-If you want your money to grow over the long term, then take advantage of Roth IRA.
Roth IRAs are good for in the short term because you get taxed on your contributions today; however, when you retire and begin to withdraw funds at age 59 1/2, your withdrawals will not be taxed as long as they have been in the account for a period of 5 years. You will have to pay taxes on any earnings that have accumulated over time.
Types of roth IRA Companies
There are two types of roth IRA companies: custodian and brokerage firms.
Traditional IRA companies:
-Custodian IRA companies are the oldest and have been around for decades. If you have a large amount of money to invest, then the custodian company might be for you. These companies are usually large national companies and give you a variety of options to choose from.
-The best way to invest in custodian IRA is through one of their mutual funds or portfolios. They will give you complete access to their investment choices and let you make all decisions on how your money is invested.
-Many custodian IRA companies also offer tax free short term certificates, which allow individuals to invest in bonds or other securities with very low interest rates while avoiding paying taxes on the interest income until maturity.
-Individuals should also consider the fees charged by a custodian for holding and investing their funds. Many custodian IRA companies charge very high fees for the management of your investment portfolio. Over all, though, this is still a cheaper option to most brokerage firms because you get all the benefits of having everything handled by the company.
-Brokerage firms are usually much smaller and offer you more personalized service and investment choices than custodian companies. You can do pretty much anything as long as it doesn’t violate any securities laws.
-They offer online access to account information, but they don’t offer a lot of personal guidance on how to invest your money or manage it over time.