Your 2011 tax documents are beginning to arrive in the mail, signaling the start of another tax filing season. Right on cue, financial firms are in a spending battle to win the business of anyone considering an IRA rollover as part of their tax strategy and retirement savings plan.
A handful of firms are offering deals that look a little like a rewards credit card—only the rewards go to your retirement account. Basically, your new IRA gets credited with cash back of up to $2,500 depending on how much money you roll over from another firm. Here’s a look at some of the deals out there:
- Schwab is offering cash bonuses on a sliding scale—$200 for a $50,000 rollover; $300 for a $100,000 rollover; $600 for a $250,000 rollover; $1,200 for $500,000; and $2,500 for $1 million. These bonuses apply to any money not already with Schwab that is rolled into a new or existing Roth or traditional IRA before April 17. The account must remain open for one year.
- TD Ameritrade is offering cash bonuses on a sliding scale—$100 for a $25,000 rollover; $300 for $100,000; and $600 for $250,000. The bonuses apply to money transferred from another institution into a new or existing IRA at TD Ameritrade by Feb. 29. The account must remain open for at least nine months.
- Merrill Edge is offering cash bonuses on a sliding scale—$50 for a $10,000 rollover; $100 for $25,000; $250 for $100,000; and $500 for $200,000. To qualify, you must open a Merrill Edge traditional, Roth or SEP IRA with money transferred from another institution. The balance must be held in the account for at least 90 days. The offer expires April 15.
- ETrade is offering cash bonuses on a sliding scale—$100 for a $25,000 rollover; $250 for $100,000; and $600 for $250,000. The money must come from another institution by April 17 and remain in the account for at least six months. The offer applies only to new accounts. Similar (not exact) cash-back bonuses apply to money moved into an existing ETrade account anytime before the end of the year. You also get commission-free stock trades for two months.
These firms aren’t offering cash back as an act of altruism. The sums are fairly modest in relation to the rollover amounts required, and through fees, they expect to recoup their investment over time and then some. Still, if you are in the market for an IRA rollover these offers are a good place to start.
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But before making a move consider other factors, like fees, investment choice and fund performance. The investment options should allow for broad diversification. They should include low-cost index funds. The actively managed funds offered should have management fees no higher than 1.5%. The funds should also stack up respectably against comparable funds in terms of performance over the past five to 10 years.