Gone are the days of the free appliance when you open an individual retirement account. Firms now offer you cash, gift cards or other bonuses as competition surges to handle your IRA. Although these deals make great freebies, check into a firm’s investments, past performance and overall costs before making a selection. Also, keep in mind that you can take advantage of opening additional accounts that offer bonuses.
Make Up for Any Transfer Fees
Attractive promotions help financial firms because they can earn back their money over time through management fees. Taking advantage of a bonus works well if you’ve been planning to change brokers or financial planners, because the extra cash usually makes up for any transfer fees charged by firms. Some companies offer a transfer fee reimbursement for switching to their IRA accounts.
Watch for Allowable Limits
Cash rewards for opening an IRA account can be quite large, so make sure your free money does not exceed your annual allowable IRA contribution of $5,500 as of 2013, or $6,500 if age 50 or older. The contribution limit does not apply to IRA rollovers. Get the details on how the company treats the IRA contribution. Depending on the time of year, a company might count the contribution for the previous or current year. Some offers require you to keep your account open for several months or you will lose the bonus.
Consider Tax Consequences
Bonuses can pad your account or provide you with savings, but watch out for taxable freebies. Companies report certain promotions to the Internal Revenue Service and don’t necessarily let their potential customers know this. This can cause an unpleasant surprise at the end of the year when you discover the special gifts you received are taxed. For example, one bank offered airline miles as a bonus for opening a new account, and customers who took the offer were later notified the gift counted as taxable income. To avoid unwanted costs, ask the institution or a tax professional about tax consequences for any tempting extras.
Browse Deals for Small and Large Investors
Rewards for opening a new IRA account can range from $50 for a minimum deposit of $200 to $500 or more for deposits of $200,000 and above. One retirement plan company had an offer of a 3-percent bonus on an IRA rollover for a $50,000 minimum, which could earn you at least a quick $1,500. Other firms provide deals for up to 500 free trades over a 60-day period when you open an IRA account for as little as $2,000. Gift cards and promotions can amount to $500 for opening new accounts with certain companies. These offers come and go, so check the expiration dates on all deals to make sure the deposit is worth your time and money.
- Stockbyte/Stockbyte/Getty Images
- Ways to Cut Your Household Budget
- The 60-Day Grace Period for Withdrawals From Retirement Accounts
- How to Contribute to the 401(k) and Roth IRA
- Will Credit Card Companies Increase Your Limit if You Ask?
- Can I Put All of My Bonus in My 401(k) to Avoid Taxes?
- How to Withdraw Money From a 401(k) Plan & Move It to an IRA Benefit Account
- Direct Deposit Vs. Wire Transfer
- How to Change Brokers for an IRA Account