Setting up Your Brokerage Account
[Updated June 2016]
I use two brokerage accounts for Retire on Rewards - a traditional IRA with Schwab and a taxable account with Fidelity.
In an ideal world, I'd have all of the rewards consolidated into one account for simplicity and I would prefer that account be a Roth IRA as it is the most advantageous for tax purposes. For a quick overview of Roth IRAs vs. Traditional IRAs, click here. I don't qualify for a Roth IRA so I use a traditional IRA. Since I can only contribute $5,500 annually to the IRA account, I need to have a taxable account that houses my reward balance during the year until I make my contribution (and carry any overflow if I save more than $5,500 in a given year).
Why Schwab? Simple. My employer uses them for a work sponsored SEP-IRA plan so I decided it was better to have both IRAs under one roof. Schwab also offers free trades for certain ETFs and free dividend reinvestment. Minimizing fees is a big part of my investing strategy so they met my criteria.
Why Fidelity? Fidelity issues a Visa credit card which offers a flat 2% cash reward on all purchases. This is my default card and the reward automatically gets added to my Fidelity account when I reach $50 in rewards. If I hadn't been a Schwab customer for a really long time (OptionsXpress starting in 2004), I'd just have a Fidelity IRA and a Fidelity taxable account. I like their platform better than Schwab and their fees are lower.
One other potential choice was Merrill Edge because they offer 30 free trades if you are a Platinum Bank of America customer. There is also a really nice Platinum bonus if you use the Bank Americard Credit Card. Full details here. However, I love Silicon Valley Bank and the free trades are not enough of a reason to switch.
Now that your brokerage account(s) are set up, it's time to start accumulating rewards!
Questions? Comments? Tweet me @RetireOnRewards.
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