IRAs are a great way to save for retirement. They can serve as your main retirement savings vehicle or as a supplement to other retirement savings accounts, such as a 401(k). They can also receive rollover funds when you change jobs or retire.
Not all of us are comfortable managing our own IRA accounts, though. Perhaps you need help choosing your own investment or maybe just want some professional guidance. If this is the case, a Managed IRA might be a good solution for you.
What Is a Managed IRA?
There are different IRA account types. A managed IRA can be a traditional or Roth account. The annual contribution limits are the same as with any other IRA account.
The difference is that a professionally Managed IRA account is tailored to your situation, age, time horizon until retirement, risk tolerance and other factors.
Is The Managed Option for You?
Like many aspects of financial planning, the answer is “it depends.” To help you decide, ask yourself these questions:
- Am I comfortable managing my own investments?
- Am I comfortable working with a financial advisor?
- Am I saving enough for a comfortable retirement?
- Is my IRA is on the right track when I experience changes in my situation?
- Do I have a regular review and rebalancing plan in place for my IRA?
If you did not answer yes to most of these questions, a Managed IRA might be the answer for your needs.
Advantages of Professional Advice
While hard to quantify, there have been some studies on the value added by professional advice.
One such study, conducted by Vanguard, indicated that professional advice can add about three percentage points annually to a client’s returns.
Research showed that advisors also add value by designing a holistic financial plan that incorporates the client’s ability and willingness to bear risk; counseling clients through bad markets; adjusting their strategy at appropriate times due to life changes; and advising on retirement strategies, such as when to claim Social Security.
Professional financial advice offers a number of advantages that extend to Managed IRA accounts:
- Peace of mind knowing your account is being tailored to your needs
- Advice from an independent third-party professional who will make investment recommendations that are not based on emotions, but rather sound financial principles
- An investment approach that properly balances risk with potential reward
- Knowledge that someone is monitoring your account on a consistent basis
How to Choose A Managed IRA Advisor
One you’ve made the decision to work with an advisor, the first step is asking them how they are compensated.
If they are primarily a broker-dealer or work on commission, they should be avoided. They are mostly selling products, not advice. And your investment returns will suffer.
Keep in mind that there are two essential parts of a Managed IRA: Finding out what you need to do and coming up with the best plan to help you reach your goals. Here’s your checklist for evaluating an advisor:
- A firm that provides independent, unbiased advice and does not sell financial products
- Low fees for advice and a low-cost approach to investing
- No hidden conflicts of interest
- A provider with a record of success and experience in tough market environments
- A low initial required investment
- Easily accessible client support
Ready to talk? We can walk you through the process of choosing an advisor. Give us a call.
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