Tax Season Conundrum: Should You Enroll in an IRA Just to Nab a 'Bonus'?

Tax Season Conundrum: Should You Enroll in an IRA Just to Nab a 'Bonus'?

’Tis the season for taxes.

And now, financial services companies are also hoping it's the season for IRA openings.

That's because, as that April 15 deadline approaches, it's also people's last chance to make IRA contributions that qualify for deductions on 2014 tax returns.

And to take advantage of this time period, companies are increasingly sweetening the deal—by offering “bonuses” to incentivize savers to move their retirement savings from 401(k) accounts to new IRAs (or from one IRA to another) just in time for filing.

For example, according to MarketWatch, Ally Bank is offering bonuses up to $500 for new clients. E*Trade and TD Ameritrade are both offering as much as $600. Meanwhile, Fidelity has introduced an initiative to match contributions by up to 10% for three consecutive years, for those who open a Fidelity IRA.


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Sounds like a pretty good deal, right?

But before you throw all of your retirement savings into the metaphorical moving van, consider this: that shiny new-client bonus probably isn’t enough of a reason for you to change accounts.

“This is a decision that you are making with a lifetime of savings,” Ed Slott, an IRA expert, tells MarketWatch. “It’s a major financial decision. Don’t do it on the basis of a bonus.”

While the cash or contribution-matching incentives might be nice now, in the long run, sticking with your 401(k) could be the better decision. So instead of jumping on that bonus, it's important to consider—and compare—major factors like fees and investment options first, before switching accounts.

One big incentive not to switch to an IRA? According to MarketWatch, you may qualify for cheaper mutual funds with a 401(k).

If you'd like to learn more about all things retirement, go back to the basics with Retirement 101, and start mapping out your savings strategy today.


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