Who's Offering the Best Deals on IRAs?
Attention procrastinators, the deadline is fast approaching for you to make your IRA contribution for tax year 2006. Your contribution must be made by the federal tax return due date, which is April 17 this year. Filing for an extension does not extend this deadline.
While an IRA has long been one of the best ways to build your personal retirement fund, the introduction of the Roth IRA did complicate the picture somewhat. Deciding whether a traditional or Roth IRA is best in your situation, or whether you even qualify for a Roth, requires some number crunching. Ditto for whether to convert your traditional IRA to a Roth. Fortunately, there is a wealth of information available from various brokerages and fund organizations to help sort through these issues. Call them directly, or go online to find what you need. The IRAs & 401(k)s page of the SMI website is an excellent place to start if you have questions.
Even after you know which kind of IRA you want, the question still remains: Where should you open your account? All the major banking, brokerage, and mutual fund institutions offer IRA accounts. To help you find a home for your IRA, we contacted the most popular organizations among SMI readers for following our Getting Started (Level 3) or Sound Mind Portfolios (Level 4) to find out which ones currently offer the most attractive terms (see table below). The competition for your IRA business is fierce, as can be seen by the willingness of the firms to waive their annual fees for even accounts of relatively modest size.
At your discretion, IRA accounts can contain a wide variety of investments. Accordingly, when selecting a home for your IRA, we suggest you give great weight to having a large number of investment alternatives from which to choose. That's why we feel the fund supermarkets are usually a better option than opening your account directly with a particular fund organization. (The exceptions to this rule are Vanguard and the SMI Funds, which offer a convenient one-stop-solution for Indexing and Upgrading, respectively.)
It also pays to be strategic in choosing investments for your IRA. You wouldn't want to invest in tax-exempt securities like municipal bonds in your IRA because there would be no additional tax savings. In fact, in a traditional IRA, you would be turning the muni bond interest, ordinarily tax-free, into taxable income. Why? Because all your earnings are taxed when you withdraw them, even the earnings that originally came from otherwise tax-exempt investments. All earnings are tax-free in a Roth IRA. Since indexing is inherently more tax-efficient than Upgrading, those using a mixture of both strategies should shelter as much of their upgrading activity as possible within the IRA.
What if you already have an IRA set up, but are not happy with the investment results you've been getting? The IRS allows you to transfer the assets in your present IRA to a new IRA account without paying any taxes or upsetting your tax-deferred status. The best way is to have the folks at your new institution do it for you. Once you sign the authorization forms they provide, they will take care of the paperwork in what's called a trustee-to-trustee transfer 
. It's especially important to handle it this way if you're leaving your company pension plan. Your benefit check will be hit with a 20% withholding rate if it's made out directly to you. You can avoid the withholding by arranging in advance for your employer to send your money directly to your new IRA rollover account in a trustee-to-trustee transfer.
If you have more than one IRA account, you might consider combining them into one. It's not unusual for people to have several IRAs spread around at various places. By combining them into one account, you can save on annual account fees and cut your paper work. More importantly, you'll have a much easier time managing your portfolio and tracking its investment performance. 
- SMI's IRA & 401(k) page
- What is an IRA asset transfer?
- What is an IRA rollover?
- Maximizing Your IRA Opportunities
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