Should You Open an IRA at a Bank Or Credit Union?
Anyone with an income can open an IRA to save for retirement. There are various IRA accounts, from savings options with low interest rates to investment accounts that grow based on performance in the stock market.
Selecting an account that fits your financial circumstances and long-term goals requires careful consideration, but SmartAsset offers a free tool to connect you with pre-screened advisors who can offer guidance.
Banks
Credit unions are community finance organisations owned and managed by their members, with any profits returned back in dividends, lower loan rates, free or low-cost services and additional services such as SEP IRAs/SIMPLE IRAs designed specifically for self-employed workers and small business owners.
Contrary to banks, which are insured by the Federal Deposit Insurance Corporation (FDIC), many credit unions are covered by the National Credit Union Share Insurance Fund (NCUA), providing up to $250,000 of coverage per member and making them an attractive option if investing your IRA with them. Furthermore, credit unions tend to offer more personalized customer service than large banks which makes them ideal choices for people looking for an institution that supports their values.
Credit unions
An Individual Retirement Account, or IRA, is an excellent way to invest in your future. An IRA savings account can be opened with many banks, credit unions and online brokerage firms as well as investment companies; it is important that before selecting one it be evaluated carefully in terms of fees and minimum opening requirements.
Credit unions tend to provide lower fees and higher annual percentage yields on CDs and deposit accounts than banks do, as well as having more personal relationships with members and often not being subject to federal taxes.
Credit unions differ from traditional banks in that they are not covered by the FDIC; however, the National Credit Union Administration (NCUA) uses federal monies to back deposit accounts at all federal credit unions – so your investments in an IRA should generally be safe with them. You can find participating credit unions and their rates on NCUA website.
Brokerages
If you have reached the limits of your employer-sponsored retirement account and wish to start saving independently, an Individual Retirement Account (IRA) is an ideal solution. It can be opened at banks, brokerage firms or robo-advisors; though it’s essential that you select one suitable to you based on factors like product range. Banks typically provide savings accounts with higher interest rates on deposits while credit unions tend to offer lower APYs for loans than banks do.
E-Trade, Firstrade or Scottrade offer an assortment of investment accounts such as traditional and Roth IRAs, SIMPLE IRAs and SEP IRAs for small business owners. Transaction fees tend to be minimal with these brokerage firms offering ETFs, mutual funds and individual stocks as options for investing. You could even open one through an automated robo-advisor that invests automatically into low-cost index funds or ETFs – offering additional savings over traditional investing.
Other financial institutions
As retirement money accumulates over time, it must be invested wisely. While banks typically offer limited investment options with regard to Individual Retirement Accounts (IRAs), brokerage firms and investment companies often provide more comprehensive mutual fund selection with low transaction fees. Some even offer passive IRA portfolios that invest in market index funds for consistent growth over the long run.
Consider all costs when choosing an IRA provider, including management fees, transaction costs and minimum opening requirements. Furthermore, take a close look at any educational resources available to DIY investors.
IRAs can be opened easily and cost-effectively through brokerage firms; however, you must understand all applicable rules and regulations, such as any penalties associated with early withdrawals. An IRA could also provide investors with additional savings opportunities who already have a 401(k). SoFi Invest offers both traditional and Roth IRAs for added convenience.
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