How do I Choose the Best IRA Plan?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 January 2020
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Anyone who has thought about setting up an Individual Retirement Account (IRA) knows that there is not just one IRA plan out there. In fact, today there are so many options when it comes to choosing an IRA plan that the task of deciding which of the many offerings would be the best fit is a difficult one. Before making any commitments, take some time to consider these three key factors: the reason behind opening the IRA, the type of investments you are comfortable with, and what plans you have for using the funds from the retirement account in the future.

At first glance, the reason behind choosing any type of IRA plan seems self-evident: you want to create a nest egg for your retirement years. While this is true, it is important to dig a little deeper than that. Will the IRA be your primary source of income after retirement, or serve as a backup resource to your pension plan, Social Security, or other revenue sources? Determining how the account will fit into your overall retirement strategy will make it a little easier to focus on those IRA options that best fit your needs.


It is also important to consider the types of investments that you are comfortable with and contrast that with the type of return you would like to get from an IRA plan. Different plans invest contributions in different ways, with some plans going for investments that are more volatile, but also have the potential of a higher return. For people who are happy with a more modest but reliable return, choosing an IRA where the investments lean toward less volatile selections is the best approach.

By thinking in terms of how you want to use the proceeds from your IRA plan in the future, you can also narrow the options somewhat, possibly down to the point of looking at Simple, Traditional, and Roth IRA possibilities. For example, would you prefer to not pay taxes as you receive disbursements from the plan after retirement? If that is the case, then you want to stay away from tax-deferred plans and focus your attention on options like a Roth IRA where you pay taxes on the contributions now, but incur no tax penalty when you begin to withdraw funds after reaching retirement.

There are other factors to consider when choosing an IRA plan, including whether the IRA will roll over into another plan with ease, or what type of limitations there are on withdrawals, including the age at which withdrawals are allowed. Take the time to decide exactly what you want from your IRA, then spend some time with a financial advisor. This will make it much easier to find your way through the many options, and settle on the best IRA plan for your situation.



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