Starting IRA

[skives]

So currently I have a 401k through work where I contribute 12%. I get a match from my employer but its not much. I have always heard IRAs were the way to go but I don't know where to go to get one and how to manage it. Any advice on IRAs?

[MakeAStash]

Most places at which you can open investment accounts, such as banks and brokerages, can also open an IRA account for you. It's then up to you to put money into it.

[skives]

Thanks for the reply. What I am unsure of is how to invest the money cause I'm use to the 401k where they take care of it all. I'm not use to having to buy and sell stocks.

[thesimplemoneyblog]

There are a lot of options within an IRA. As MakeAStash said, you can open up an IRA at a number of different places: local banks, brokerage companies (Vanguard, eTrade, Schwab, Fidelity, etc.), and credit unions. With a brokerage company, you have a seemingly endless amount of mutual funds, stocks, ETFs, bonds, etc. that you could select, so the research process is quite a bit more cumbersome than just looking at the limited options in a 401(k). You can hire an investment professional to manage it for you depending on the size of your IRA or you can spend the time finding the right investments for you. Some things to consider (this is not an all-inclusive list by any means) are: expense ratios, minimum purchase amounts, minimum subsequent purchase amounts, diversification across countries, regions, markets, and industries, manager tenure (if applicable), 1 yr, 3 yr, 5 yr, 10 yr track record, as well as your preference to withstand the volatility of a market (i.e. if you are more conservative or very aggressive).

If you don't want to actively manage the account, there are a lot of low-cost, passive options if you would prefer that route (exchange traded funds - ETFs or index mutual funds).

[Petunia 100]

I suggest you choose a low-cost, broadly diversified single fund which does all of the re-balancing for you. Additionally, choose one which slowly becomes more conservative over time. What sort of fund does all of that? A target retirement fund. They are designed to be a hands-off way to save/invest your money. My personal opinion is that those offered by Vanguard are the very best available. Those offered by Fidelity and T. Rowe Price are good choices too.

You can open an IRA with any of those 3 firms on their respective websites. Or, you can call their customer service and they will walk you through the process.

Do you already have a bit of money on hand to get started? You will need 1k to open an IRA at either Vanguard or T Rowe Price. I believe Fidelity requires 2.5k, but I am less familiar with Fidelity so that info may be outdated.

If not, then set some money aside each month until you have enough. Remember, you have until April 15, 2013 to make contributions for 2012.

[sherylgray]

Don't fail to file Form 8606 to report and track the amount. A small mistake can cause you to fill all the amount as tax when you withdraw your IRA balance. There are some cases. Form 8606 can save you from this disastrous.

[Petunia 100]

Don't fail to file Form 8606 to report and track the amount. A small mistake can cause you to fill all the amount as tax when you withdraw your IRA balance. There are some cases. Form 8606 can save you from this disastrous.

This is only an issue if one makes any non-deductible traditional IRA contributions.