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Jan 23

Opening My IRA Account

I finally took the plunge and opened an IRA.

But before I get to who I decided to open an account with, I want to talk a little about why I opened an IRA account and what you might want to consider before opening one too.

IRAs are a great way to save for retirement as they offer you a chance to buy and sell investments while, in one way or another, side stepping the tax man. For me, what makes an IRA an attractive option is the control over how my money is invested. I decide when to buy and sell stocks or bonds, and get to control what I invest in. The success or failure of my investments is in my hands. If you would like to learn more about IRAs and Roth IRAs check out our basic guide here.

For some, it’s easier or more preferable to have a broker invest on their behalf. Many a fortune has been lost as well as made and for the more cautious investors among you, it can be better to have a pro guide you through your investment decisions.

Personally I will be opening my IRA with the maximum contribution for the year (currently $5000), as there is a particular new technology that I think is going to become a household name and so I’m keen to invest in it. More on what that technology is, and why I think it will be so important, will be revealed in the coming weeks.

 

Important!

For anyone who doesn’t have an IRA or may have forgotten, the deadline for making contributions for this tax year is April 15th.

 

When deciding whether or not to start or add to your IRA, there are (at least for me) two things to consider:

 

1. Access

How much money can you comfortably afford to have at limited access? While an IRA allows you to trade stocks, bonds and the like, it is not the same as a regular trading account. IRAs are intended for retirement and so whatever money you put in your IRA needs to stay in your IRA. There are penalties to keep in mind for anyone thinking of withdrawing from their account before retirement, so think hard about how much you can afford to pay in and not take out. There are a number of exceptions where penalties for early withdrawal are not enforced, for more information on  IRA charges and penalties, click here.

 

2. What To Invest In

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If you’re unsure of what stocks, bonds or even industries you would want to invest in, maybe for now an IRA or Roth IRA might not be the right option for you. IRAs are investing accounts, not savings accounts. If you’re looking to simply save, an IRA is not going to help you. If you find you’re reluctant to invest and you just leave your money in your account, you will gain no interest. If your money is not invested, then it sits dormant, gaining no interest and slowly depreciating at the rate of inflation. If, on the other hand, you’re looking to invest your savings, then IRAs are great – their tax benefits alone make opening one more than worth it.

 

So after these considerations, I chose to open my IRA with TradeKing and add the maximum contribution for the year. I chose them simply because I’m planning on trading frequently within my account, and they offered the lowest trade fees I could find – at only $4.95 per trade. With other popular companies charging over $10 per trade, that saving will soon add up.

 

Who you choose to open an account with really should depend on why you’re opening one at all. For people like me who want to trade often, TradeKing is perfect, but you should check them out and see if they are the right company for you.

 

ThirtySomething.

 

 

Image courtesy of ddpavumba / FreeDigitalPhotos.net

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