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Contributor

I'm ready to add a traditional IRA to my portfolio of retirement savings accounts to take advantage of the preferred tax treatment (I don't qualify for a Roth), and although I can find lots of advice on chosing which IRA type to go with or when it makes sense to put money in an IRA vs. 401K or other account, I can't find any advisc on how to select an IRA custodian.  Different brokers will charge different fees, but I can't even seem to find information on the fees USAA charges.  In the past I would just default to doing everything through USAA but when I bought my house, I actually got a much better rate by shopping around so I try not to assume USAA will be the best option anymore.

 

Anyone have any tips/advice on proper due diligence before opening an IRA?  I'm already confident a traditional IRA is the right type for me to open and fund.

 

Thanks.

4 REPLIES

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Thanks for the post.. I have located your information. I will engage a team to review the situation and contact you shortly. I appreciate you reaching out to us today. - Jason
 

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The fees are the expense ratios of the funds you chose to buy.  If you hold stocks the fees are the commission on the trade.  I would advise you to look at Capital One Investing if you are worried about fees.  Trades there are less and you caan do dollar based investing in an entire portfolio of funds and ETFs for a flat fee of 18.95.  If I used USAA for the portfolio I held there the cost would have been 71.60 to invest in the same ETF's in the same manner.  If fees and expense are of no concern than USAA is a decent choice, most of their fees are average, but if you are not simply striving for mediocracy than average is not good enough.  

 

I did just move a ROTH IRA back to USAA but I do not think I will put another dollar in since the commissions and fees are much higher than if I continue to invest first throu Capital One.

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On a related note, unless you are pretty savvy and very interested in this type of thing, I recommend against individual stocks in your IRA. For almost everyone, passive, index investing is the best way to go. Heck, it is what Warren Buffet recommends to everyone else and what he recommends to his (eventual) widow. A buy-and-hold strategy of passive,  broad market index funds has been demonstrated time and again to be the best strategy overall. I'll recommend a little personal education if you are interested.

 

The case for (passive) index fund investing

Investment start-up kit

 

Have fun with your wealth building!

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You should absolutely be concerned about fees. Fees in any investment account have a significant impact in your long-term returns. Seemingly small fees like 1% a year are actually significant and lead to dramatically less money in your account over time.

 

I strongly recommend you check out Vanguard for your investment needs. If you wish to stick with USAA, then invest in Vanguard funds inside a USAA brokerage account. Be careful there though because you likely will have to pay a fee each time you invest, so unless  you are dumping a chunk and leaving it, it would be more cost-effective to go directly with Vanguard (or Fidelity, though be careful of which funds you choose).

 

Do some reading yourself online to educate yourself about the impact of fees. As an example, a $100K over 20 years turns into $380K at a 0.10% expense ratio, but only $292K at a 1.5% expense ratio. This is serious money!

 

Example article on impact of fees

 

Play with Vanguard's expense simulator yourself

 

Personally, I recommend avoiding all investment funds that charge anything over 0.3%. There are plenty of low-cost options out there to fit every goal and risk tolerance. Good luck!