For a vehicle with an annual contribution limit of just $5,500 ($6,500 for those over 50), investors sure have a lot riding on IRAs. Assets across all IRA accounts topped $8.4 trillion in 2017, making the vehicle the top receptacle for retirement assets in the U.S., according to data from the Investment Company Institute. In addition to direct annual contributions, much of the money in IRAs is there because it has been rolled over from company retirement plans of former employers.
Opening an IRA is a pretty straightforward matter: Pick a brokerage or mutual fund company, fill out some forms, and fund the account. Yet, there are plenty of ways investors can stub their toes along the way. They can make the wrong types of IRA contributions--Roth or traditional--or select the wrong types of investments to put inside the tax-sheltered wrapper. And don't forget about the tax code, which delineates the ins and outs of withdrawals, required minimum distributions, conversions, and rollovers. Rules as byzantine as these provide investors with plenty of opportunities to make poor decisions that can end up costing them money.
Click here to view the 20 mistakes that investors can make with IRAs, as well as some tips on how to avoid them.