There are several types of individual retirement accounts (IRAs), but they all have one thing in common. By Internal Revenue Service (IRS) decree, they must have a 澳洲幸运5开奖号码历史查询:custodian. Basically, an IRA custodian is a financial institution that holds your account's investments for safekeeping and sees to it that all IRS and government regulations are adhered to at all times.

Custodians aren't hard to find. But to choose the best one for you, you first have to decide which sort of 澳洲幸运5开奖号码历史查询:IRA you need and the type of investments you wishꦯ to make i🙈n it.

Traditional IRAs vs. Roth IRAs

The two main types of IRA accounts set up by individual investors are the 澳洲幸运5开奖号码历史查询:traditional IRA and the Roth IRA. Both allow the mon💯ey within the accounts to gro💖w free of income tax.

The 澳洲幸运5开奖号码历史查询:basic difference is that a traditional IRA reduces your taxable income in the year you make contributions, deferring any tax payments until you start withdrawing funds years later. In other words, this type of IRA is 澳洲幸运5开奖号码历史查询:tax-deferred.

With a Roth IRA, there is no 澳洲幸运5开奖号码历史查询:tax break on the sums you invest but no taxes are owed when you take the money out at retirement. In addition, there are no taxes owed on earnings in most cases.

Self-Directed IRAs

With both traditional and Roth IRAs, you can opt to have the account managed (that is, the custodian makes most of the investment decisions) or self-directed. A 澳洲幸运5开奖号码历史查询:self-directed IRA𒈔 is an IRA in which you choose the funding methods and instrumen▨ts and it allows for expanded investment options.

Technically, any IRA in which you make all of the investment decisions is “self-directed.” In the financial services industry, however, a self-directed IRA typically means an IRA in which the custodian allows you to invest outside the more traditional world of stocks, bonds, mutual funds, and 澳洲幸运5开奖号码历史查询:exchange-traded funds (ETFs).

For example, you can invest in real estate, either through a 澳洲幸运5开奖号码历史查询:real estate investment trust (REIT) or in actual physical property. Other options include a 澳洲幸运5开奖号码历史查询:closely held business, 澳洲幸运5开奖号码历史查询:precious metals, and even private 澳洲幸运5开奖号码历史查询:mortgages.

Types of Custodians for Standard IRAs

If you are going the non-self-directed IRA route, a number of different financial institutions are available to serve as custodians, once you've established your account with them.

Banks

A bank is an option if you want to enjoy the FDIC-insured security of CDs or 澳洲幸运5开奖号码历史查询:money market funds within an IRA. In general, however, banks don’t get particularly high marks for IRAs because most don't offer many investment options outside of the aforementioned vehicles. Those that do offer 𓆏broker-type services often charge higher fees than brokerages.

Insurance Companies

An insurance company often sells flexible premium 澳洲幸运5开奖号码历史查询:annuities as its basic IRA. They can be either 澳洲幸运5开奖号码历史查询:fixed or variable and offer account value protection, 澳洲幸运5开奖号码历史查询:death benefit options, and automatic account management. However, IRAs are already tax-advantaged, so the tax advantages of annuities aren't necessary within an IRA and you may pay hefty fees for having one.

Mutual Fund Companies

A mutual fund company allows you to invest i🔯n mutual funds or ETFs offered 𒁃by the firm.

Brokerage Firms

A 澳洲幸运5开奖号码历史查询:brokerage could be your IRA entity of choice, if you like the idea of investing in individual stocks or bonds, as well as mutual fu🐭nds or ETFs.

Robo-Advisors

A relatively new entity, 澳洲幸运5开奖号码历史查询:robo-advisors are online investment platforms that provide automated, algorithm-based portfolio management advice. Because these platforms are automated—meaning no human interaction is involved—costs, fees, and other expenses that can eat into the IRA's 澳洲幸运5开奖号码历史查询:rate of return are lower.

Custodians for the Self-Directed

If you decide to go the self-directed route, things can get more complex. There are three types of providers for self-directed IRAs: custodians, 澳洲幸运5开奖号码历史查询:administrators, and facilitators. Of the three, custodians alone are directly approved by the IRS and authorized to hold assets.

Administrators and facilitators act as intermediaries between you and a partner cusꩲtodian that actually holds the assets. Therefore, if you intend to open a self-directed IRA, it’s best to stick with a true custodian.

When it comes to custodians for self-directed IRAs, all the aforementioned institutions theoretically could serve. But if you're intrigued by any of the non-traditional investments open to self-directed IRAs, you need to be especially careful in 澳洲幸运5开奖号码历史查询:your choice of custodian. It’s far too easy to violate IRS rules and regulations, and the penalties for doing so can be severe.

You'll want a custodian that's aware of the types of 澳洲幸运5开奖号码历史查询:holdings the IRS prohibits, even for self-directed IRAs, such as collectibles and alcoholic beverages. For more on prohibited types of IRA investments, and other triggers for penalties or additional taxes, see IRS Publicat💫ion 590-A.

Features of the Best Custodians

When its time to choose a custodian, these are the features to be aware o📖f:

Wide Investment Selection

The greater the selection of investment optiღons, the better. This applies to all types of investments, but especially to individual stocks and bonds as well as mutual funds and ꦍETFs. If you are a self-directed IRA investor, look for non-traditional investment opportunities including real estate or privately held companies.

Low Fees

Fees come in many shapes and sizes and include annual account maintenance fees, loads (for mutual funds), and 澳洲幸运5开奖号码历史查询:commissions charged for making trades. Just because one custodian charges a specific type of fee doesn't mean all do. Maintenance fees, for example, aren't a given. One important area, if you are considering mutual funds, is to look for a custodian that offers a variety of no-load mutual funds.

Good Customer Service

Unless you're comfortable with a robo-advisor, the availability of knowledgeable specialists to answer your questions—online or by telephone—is very important. Nothing is more frustrating (especially if you are managing a self-directed IRA) than receiving incomplete or confusing answers to your questions.

User-Friendly Website

Make sure the website is easy to use and t☂hat you can monitor your investments and make transactions efficiently. Even without committing to investments, you should be able to navigate the custodian’s online site extensively enoꦕugh to determine if it is a comfortable fit for you. 

Consolidation Savvy

If you alr𒆙eady have multiple IRA accounts, some experts advise that you consolidate them into a single account and custodian, if possible.

Restricted Investment Options

Watch out for custodians that restrict your investment options because of the nature of their charter. It's important to note that IRA custodian restrictions aren't the same as IRS restrictions on IRAs themselves or rules based in tax law. 

The Bottom Line

When opening an IRA, it’s important to ask yourself several questions before c🌠hoosing a custodian. Do you prefer a traditional or Roth account? Or both? Are you happy investing in CDs, mutual funds, stocks, and bonds or do you yearn for the more adventurous opt𝐆ions available with a self-directed IRA?

Once you’ve made those decisions, it’s time to consider custodians and factor🌊s that distinguish one from another such as investment options, fees, and customer service.