Types

• Many different types of financial institutions offer IRAs. The most common types of custodians are banks, credit unions, and discount and full-service brokerage houses. There are also professionals and firms that specialize in managing self-directed IRAs, which give you broad latitude to invest in non-traditional financial vehicles like real estate, or even livestock.
  
  

Function

• The IRS requires that IRAs be managed by a custodian, who is responsible for executing financial transactions that take place in the account and keeping records. If you have any doubts, make sure a prospective custodian is IRS-approved, particularly if you are opening a self-directed IRA.
  
  

Significance

• The type of IRA custodian you choose will determine where you can invest your IRA dollars. For instance, banks usually have limited options, like CDs and money market accounts. If you go with a brokerage firm, you'll have the option of investing in stocks, mutual funds and exchange-traded funds. A self-directed IRA custodian may give you the freedom to go in another direction entirely.
  
  

Considerations

• Besides investment options, you should also look at fees associated with executing trades and otherwise maintaining the account. Customer service is another important issue: How easy is it to make a contribution or request a withdrawal? Can you access your account online? How helpful are the custodian's representatives?