How do I choose an IRA provider?
Many financial institutions offer IRAs, including brokerage firms, banks, and newer “fintech” companies. In order to pick the best account for you, there’s one up-front question to answer:
Do you want to make your own investment decisions, or would you rather have the investing decisions made for you so you can just set-it-and-forget-it?
If you want to make your own investment selections, then what you’ll want is a self-directed IRA. That allows you to make your own trading decisions and invest in whichever financial securities you’d like.
The key features to compare when choosing among self-directed IRAs include:
- What do you want to invest in? The exact investment options among IRA providers vary. Most of them allow you to invest in stocks, mutual funds, ETFs (exchange-traded funds), and options. Other specialized IRA providers will let you invest in private assets and cryptocurrency.
- Access to research and data. Some brokers provide access to premium research and data. If you’re a more hands-on investor, this might be important to you.
- Ease of use — while user interfaces are getting better across the board, newer fintech providers tend to be more popular with those who really value an intuitive app experience.
If you want the investment decisions made for you then you’ll be best served by an automated IRA, also known as a robo-advisor account. Here you’ll answer a series of questions (known as a “risk-tolerance questionnaire”), and your answers will be used to create a diversified portfolio that suits your personal and financial situation. That portfolio is then rebalanced automatically over time without you having to do any work. It’s a great tool for those who don’t want to spend much time managing their investments.
The key features to compare when choosing an automated account include:
- Annual fee — most automated accounts charge an annual fee that’s expressed in percentage terms — e.g. 0.25%. This is the percentage of your assets that they’ll take annually for managing a portfolio for you. For example, if your automated IRA charges 0.25% and you have a $10,000 account you’ll pay $25 per year to the IRA provider. This fee is often referred to as an advisory fee or management fee. Most fees range from 0.25% – 0.50% so be wary of paying more than that. Some providers now even offer zero-fee accounts. Nothing is truly free though, since these IRAs will often fill your portfolio with their own proprietary exchange-traded funds (ETFs) which have their own fees.
- Ease of use — the original providers of automated accounts were tech-first companies like Betterment and Wealthfront who sought to provide a simpler, more intuitive user experience. While more established companies now offer automated accounts of their own, the newer upstarts maintain a usability advantage.
- Level of customer support — on the other hand, the longer-standing, bigger companies have more robust customer support systems built over many years, including well-staffed call centers and often even branch networks. If that’s important to you, then a larger institution might be your bet.
Get matched with an IRA provider based on your preferences! If you choose to do a 401(k)-to-IRA rollover, we’ll match you with a provider based on your preferences as part of our rollover process.