Where to House Your Rollover IRA

By Brenda Watson Newmann
Managing Editor, mPower

Last week we looked at how you can avoid losing money in penalties when you change jobs, if you roll over your 401(k) into an IRA. This week's article helps you decide where to open your IRA.

You're leaving your job and you've decided to roll your 401(k) account into a rollover Individual Retirement Account. How do you decide where to open the IRA?

There are many options available and you will need to do some research. Choosing a financial institution is kind of like choosing a doctor - you don't necessarily want to take the first one that comes along, or believe all the advertising, or use the same one your neighbor does. Everyone has different needs.

Here are some questions you should ask yourself to help you evaluate your needs.

1. Do you want advice on how to invest, or do you enjoy researching and choosing your own funds?
   
   
2. Do you want to trade online, or would you prefer to carry out your transactions in a local office, or by phone?
   
   
3. Will you be trading frequently, or do you plan to stick with your investments for a while?
   
   
4. Do you want around-the-clock access to your account (by telephone or Internet)?
   
   
5. Do you want extensive customer service (such as human beings answering the phone when you call) or would you rather pay lower fees and forego the service?
   
   
6. Will you want to dabble in individual stocks and bonds or will mutual funds be sufficient?
   
   

Once you've answered those questions, take a look at the different categories of brokers and financial institutions, and what they offer:

• A full-service brokerage such as Merrill Lynch, PaineWebber, Salomon Smith Barney, A.G. Edwards and others will generally offer the widest variety of investment choices and services (such as personalized investment advice), but charge relatively high fees and commissions. Some full-service brokers are looking into offering online trading, but on the whole these brokers are geared toward investors who require personal contact and wood-paneled offices.
  
  
• Brokerages like Charles Schwab, Fidelity, Waterhouse, Jack White, E-trade and others generally offer a variety of mutual funds, stocks and bonds. These have traditionally been referred to as "discount" brokerages, though the delineation is blurring as some start to offer more advisory and other services. Most offer trading online, and touch-tone (automatic) or phone (human being) service. Their fees generally remain lower than those of full-service brokerages.
  
  
• Deep discount brokerages generally offer fewer services than "discount" brokerages, with their attraction being their rock-bottom fees. Some are internet-based, while others offer both online and phone service. If you like doing your own research, and you don't mind sending your orders off to a faceless web site in Kansas City, these could be the least expensive option for you.
  
  
• Mutual fund companies generally offer their own array of funds. Some also offer access to trading in stocks and extensive mutual fund menus from other fund companies, but most do not offer individual stocks or bonds, or online trading. Many will offer investment advice, for a fee.
  
  
• A bank or other financial institution (like a credit union or insurance company) will also likely offer selected services and funds (possibly including investment advice). It will probably not offer online trading, although some do. But if you have a good relationship with your bank or financial institution and you like "one-stop shopping," this might be your preferred option.
  
  

Once you've narrowed down the type of institution you prefer, you should do some sleuthing to compare fees and services at several of your top choices.

• Look at fees for: setting up or terminating an account; annual maintenance; and transferring funds in or out of the account. Also compare commissions or fees charged by individual funds within the account.
  
  
• Try phoning each company to see how long it takes to get someone helpful on the phone.
  
  
• With online brokers, look at the charges per transaction, and try to gauge reliability and speed in executing orders, especially if you will be trading frequently. Try sending in a question by e-mail and see how long it takes to get an answer. (Some online brokers have been criticized for accepting new clients even though their sites are clogged, leading to outages and pricing delays). Check to see if free real-time stock quotes and account balances are available, if these interest you.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

Where to House Your Rollover IRA

By Brenda Watson Newmann
Managing Editor, mPower

Last week we looked at how you can avoid losing money in penalties when you change jobs, if you roll over your 401(k) into an IRA. This week's article helps you decide where to open your IRA.

You're leaving your job and you've decided to roll your 401(k) account into a rollover Individual Retirement Account. How do you decide where to open the IRA?

There are many options available and you will need to do some research. Choosing a financial institution is kind of like choosing a doctor - you don't necessarily want to take the first one that comes along, or believe all the advertising, or use the same one your neighbor does. Everyone has different needs.

Here are some questions you should ask yourself to help you evaluate your needs.

1. Do you want advice on how to invest, or do you enjoy researching and choosing your own funds?
   
   
2. Do you want to trade online, or would you prefer to carry out your transactions in a local office, or by phone?
   
   
3. Will you be trading frequently, or do you plan to stick with your investments for a while?
   
   
4. Do you want around-the-clock access to your account (by telephone or Internet)?
   
   
5. Do you want extensive customer service (such as human beings answering the phone when you call) or would you rather pay lower fees and forego the service?
   
   
6. Will you want to dabble in individual stocks and bonds or will mutual funds be sufficient?
   
   

Once you've answered those questions, take a look at the different categories of brokers and financial institutions, and what they offer:

• A full-service brokerage such as Merrill Lynch, PaineWebber, Salomon Smith Barney, A.G. Edwards and others will generally offer the widest variety of investment choices and services (such as personalized investment advice), but charge relatively high fees and commissions. Some full-service brokers are looking into offering online trading, but on the whole these brokers are geared toward investors who require personal contact and wood-paneled offices.
  
  
• Brokerages like Charles Schwab, Fidelity, Waterhouse, Jack White, E-trade and others generally offer a variety of mutual funds, stocks and bonds. These have traditionally been referred to as "discount" brokerages, though the delineation is blurring as some start to offer more advisory and other services. Most offer trading online, and touch-tone (automatic) or phone (human being) service. Their fees generally remain lower than those of full-service brokerages.
  
  
• Deep discount brokerages generally offer fewer services than "discount" brokerages, with their attraction being their rock-bottom fees. Some are internet-based, while others offer both online and phone service. If you like doing your own research, and you don't mind sending your orders off to a faceless web site in Kansas City, these could be the least expensive option for you.
  
  
• Mutual fund companies generally offer their own array of funds. Some also offer access to trading in stocks and extensive mutual fund menus from other fund companies, but most do not offer individual stocks or bonds, or online trading. Many will offer investment advice, for a fee.
  
  
• A bank or other financial institution (like a credit union or insurance company) will also likely offer selected services and funds (possibly including investment advice). It will probably not offer online trading, although some do. But if you have a good relationship with your bank or financial institution and you like "one-stop shopping," this might be your preferred option.
  
  

Once you've narrowed down the type of institution you prefer, you should do some sleuthing to compare fees and services at several of your top choices.

• Look at fees for: setting up or terminating an account; annual maintenance; and transferring funds in or out of the account. Also compare commissions or fees charged by individual funds within the account.
  
  
• Try phoning each company to see how long it takes to get someone helpful on the phone.
  
  
• With online brokers, look at the charges per transaction, and try to gauge reliability and speed in executing orders, especially if you will be trading frequently. Try sending in a question by e-mail and see how long it takes to get an answer. (Some online brokers have been criticized for accepting new clients even though their sites are clogged, leading to outages and pricing delays). Check to see if free real-time stock quotes and account balances are available, if these interest you.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.