While buying an electrical appliance, most users spend a significant amount of time figuring out which one is best for them. In most cases, the purchasing decision is based on the existing customer reviews. However, choosing an IRA custodian is a lot more complicated than that since it influences your financial well-being.
Before you choose a trusted retirement custodian, you need to understand what an individual retirement account (IRA) is about and what type of IRA is best for you. Once you have clarity on those things, you can start looking for IRA custodians who will be ideal for the kind of retirement account you have chosen.
What Makes a Good Custodian?
If you have chosen a non-self-directed IRA, you can choose one of the financial institutions to be your custodian. The options are:
- Insurance Companies
- Mutual Fund Companies
- Brokerage Firms
However, if you have chosen a self-directed IRA, choosing the custodian can be a bit more challenging. Custodians are directly approved by the Internal Revenue Service (IRS) and are authorized to hold assets. So, you need to be very careful while choosing one for your IRA. Here are the factors you need to consider:
- Range of Investment Choices:
One of the major reasons for choosing a self-directed IRA is the greater selection of investment options. You get to invest in individual stocks, bonds, mutual funds, ETFs, real estate, privately held companies, and more. So, you need to see if your chosen custodian is capable of holding such a wide range of investment options.
- Lower Fees:
The fees charged by custodians may vary depending on several things. If one custodian is charging a significant amount of money, it does not mean every other custodian charges the same. Fees may include annual account maintenance fees, commissions charged for making trades, loads for mutual funds, and more. You may also consider a custodian that offers a number of no-load mutual funds.
- Better Customer Service:
You may have a number of queries regarding the investments and other IRA-related issues. Instead of going to the internet and learning about investments from unreliable sources, you should ask knowledgeable specialists. If your custodian has efficient customer service, you can simply learn about various investments and all the assets in your account from the experts.
- Easy to Use Website:
In today’s date, you should go for custodian services that can be managed using a computer or smartphone. So, you need to make sure that the website of the custodian you have chosen is user-friendly. This will allow you to monitor your investments and make transactions effortlessly. Even before committing to investments, an ideal website should be easy to navigate. You can make your decision based on your website experience.
- Easy to Consolidate:
In case you have multiple IRA accounts, you should consider consolidating them into a single account and one custodian. In order to do so, you need to find a custodian who has knowledge of the rules and regulations regarding consolidation. The custodian should also know which IRAs cannot be consolidated. Even if you do not have multiple IRA accounts, there is no harm in having the option available.
- Limited Investment Options:
You may want to avoid custodians who restrict a number of investment options due to the nature of their charter. Interestingly, these restrictions are different from the IRS restrictions on IRAs or the rules based on tax law. It is better to choose a custodian that does not have such IRA custodian restrictions.
As you may realize, choosing a custodian is more complicated than opening an IRA. So, it is important that you understand the investment options you want to explore and the kind of flexibility you want for your investments. If you have a clear understanding of these factors, finding the right custodian won’t be too much of a challenge for you.