How to Choose an IRA Provider

Quick Answer

Think about your investment goals, need for advice, possible costs and level of trust as you consider different IRA providers.

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What's the best place to open an individual retirement account (IRA)? The answer may depend on a number of factors: your investment goals, need for advice, costs and fees, the provider's track record and your comfort level.

In 2024, you can contribute up to $7,000 to a traditional or Roth IRA—$8,000 if you're age 50 or older. To make sure you're putting this money in the right place, follow these six steps when you're trying to choose an IRA provider.

1. Know Your Options

You can open an IRA with a brokerage, robo-advisor, investment company, bank or credit union. Each of these options has its pros and cons. Here's a quick rundown on some of your basic choices.

  • A brokerage acts as a middleman between you and the investments you want to purchase. When you open an IRA at a brokerage, you can choose from a wide range of investments, including stocks, bonds, mutual funds and exchange-traded funds (ETFs). A brokerage account offers a high level of flexibility that can be ideal if you want to take an active role in investing.
  • A robo-advisor is a digital investing platform that offers automated portfolio advice customized to your age, assets and investing goals. Using information you provide, a robo-advisor creates and manages your portfolio for a fraction of what it might cost to work with a human financial advisor.
  • An investment company issues and invests in securities. For IRA investors, the most common example might be a mutual fund company. When you open an IRA with a mutual fund company (as opposed to buying mutual funds through a brokerage or robo-advisor), you're focusing your investments on a "family" of investments.
  • Banks and credit unions may offer IRA CDs and/or IRA money market accounts that function much like their non-retirement counterparts, only with the tax advantages (and restrictions) of an IRA. Banks and credit unions may also have investment advisors on staff and may partner with investment companies or brokerages to offer investments beyond these basic accounts.

2. Think Through Your Investment Goals

You don't have to choose specific investments at this stage, but if you have a type of investment or goal you're interested in, now is the time to consider it. For example, you might want a brokerage account if you prefer a wide range of investment choices you can adjust as needed over the long haul. On the other hand, if you know you want a safe, stable place to keep your money for a few years without any fluctuation in value, you may want to minimize your risk and look for a credit union or bank with a great certificate of deposit (CD) rate.

Are you specifically interested in non-traditional investments like private equity, real estate, precious metals, cryptocurrencies and more? Look for a financial institution that offers self-directed IRAs (SDIRAs).

3. Gauge Your Need for Advice

Savvy investors may be comfortable creating and managing their own portfolios. However, there's nothing wrong with wanting hands-on advice, whether that means initial help planning and strategizing, periodic check-ins to make sure you're on track or full-service portfolio management with a fiduciary.

Would You Rather Do It Yourself?

You don't have to choose an IRA that comes with advisory services. Brokerage accounts, bank accounts and SDIRAs are meant to be self-managed. Even so, you can usually connect with some form of help, either through a designated contact, a phone representative, live text chat or email.

Do You Want Dedicated Help From an Expert?

Traditional brokerage accounts are most likely to include access to a dedicated advisor who can manage your portfolio. To reach this level of service, though, you may need a minimum level of assets (often $250,000) and should expect to pay management fees based on a percentage of your holdings.

How About Something in Between?

Robo-advisors have expert insights baked in, but don't offer much in the way of live human interaction. If you shop around, though, you may find robo-advisors that offer limited access to live investment advice, which could be a happy medium between going it alone and paying for full-time portfolio management.

4. Add up Fees and Commissions

Fees and commissions eat into your investment returns, and they can vary considerably from one provider to another—and depending on the level of service you receive. Compare the cost of account fees, transfer fees, advisor fees, fund management fees and any other expenses that may be associated with your account. Your brokerage should provide you with a client relationship summary that outlines the fees and costs you can expect.

5. Find a Provider You Trust

Before turning over your hard-earned money to a new financial institution, plan on doing some due diligence. Be extra cautious if you're considering an IRA provider that's new on the scene—especially one that handles non-traditional investments like cryptocurrency.

  • Look at their track record. Reviewing a provider's (or investment's) performance over the past year, five years, 10 years and beyond won't guarantee future returns, but it is an indicator of experience and longevity.
  • Check their background using online search tools from FINRA's Broker Check site and the SEC. You can also locate your state's securities regulator for more resources in your area.
  • Ask about insurance that covers your account if your provider goes out of business. Banks are typically insured by the Federal Deposit Insurance Corp. (FDIC), credit unions by the National Credit Union Association (NCUA) and brokers by the Securities Investor Protections Corporation (SIPC).

6. Check Your Gut

As a final step, think about which options feel intuitive to you. Do you have an established relationship with a brokerage or bank? Adding an IRA might feel like a natural next step, one that comes with the added benefit of easy transfers between your IRA and existing accounts using online tools that are familiar to you.

With any provider, try to get a sense of what your customer service options are if you have questions about your account or need help with transactions. Do online tools make it easy to make a contribution or track your account's performance? Are you confident that your funds are well invested? Wherever you keep your IRA, you should feel comfortable that you and your money are in good hands.

The Bottom Line

Choosing a provider is just one step in the process of opening an IRA. Though it's important to choose wisely, your choice isn't irreversible. If you decide you want to change providers, you can typically do so with relatively little pain. Just be sure to follow IRS guidelines for IRA rollovers to avoid possible early withdrawal penalties and tax.

If you're new to investing, starting an IRA is a good moment to learn investing basics, think about how much you should have saved for retirement by age and find new ways to save more. Once your new IRA is open, you'll be set for success.