How to pick among the diverse IRA options

One day, the search for the right place to open an individual retirement account may become one of those late-winter rituals - like income tax time or the start of baseball's spring training. For those who already have IRAs, the early part of the year would be a time of trying to put as much into the account as possible so as to maximize tax-free interest.

It is impossible to select any one IRA vehicle and say, ''This is the place for IRAs now.'' The fact is, there are many excellent investment options available from banks, savings-and-loans, brokerages, and mutual funds.

For the individual, choosing the best one depends on the person's age, other expected sources of income at retirement, and the level of risk that is acceptable. Theoretically, a younger person should feel comfortable being somewhat more aggressive with an IRA, since there is more time to correct mistakes or let small growth stocks become big income-producing stocks. But if aggressive investments tend to cause sleepless nights, they're not worth it.

While there are those who can afford to take advantage of the tax-free earning power of an IRA to make aggressive investments, for most people the conservative route is probably best. After all, if you put $2,000 in the IRA on Jan. 2 of each year and if you could keep it earning 10 percent a year, it would reach about $125,000 in 20 years, on a total investment of $40,000. Not bad for a ''conservative'' investment.

The most conservative investments are federally insured certificates of deposit (CDs) at banks and S&Ls, money market funds, and zero-coupon bonds. Ordinarily, a long-term CD can be a losing proposition, particularly for people in higher tax brackets, since taxes can erode as much as half their gain. But with an IRA, this gain, like all the others in an IRA, is tax deferred until retirement. Also, if you expect interest rates to rise, you can get a variable-rate CD with rates that are adjusted every few weeks in line with money market rates. Of course, if rates fall, so does the yield.

If rates do begin falling, and you think the trend will continue for a time, you can lock in the highest current rate with a fixed CD. Currently, the average rate on 6-month CDs is 9.35 percent; 12-month CDs pay 9.72 percent; and for 30 months you get 10.3 percent, according to the Bank Rate Monitor of Miami Beach. Variable-rate CDs pay about a point less.

For more flexibility, but slightly less yield, there is the bank money market account. The recent elimination of the $2,500 minimum on these accounts makes them more attractive, especially since some banks allow you to make small weekly deposits.

While CDs have fairly high - or at least predictable - current yield, they have no growth potential. So if your bank gets stronger as a business, you do not benefit; you just keep getting your interest. The same thing is true with money market funds; they only pay current money market rates, no matter how large the fund gets, although the largest funds often can pay slightly higher yields. For real growth, you need something like a stock mutual fund, real estate or oil and gas income funds, or a self-directed brokerage account where you trade stocks directly within the IRA.

Here, the question of risk arises. Should you go with a balanced stock mutual fund or try one of the more aggressive funds that invest in computers, bioengineering, or other new industries and companies? The answer depends on your tolerance for risk, your knowledge of these industries, and the number of years before retirement. Even if you are fairly close to retirement, a more aggressive fund might make sense, if there is already going to be adequate income from other sources.

The best mutual fund for an IRA is the kind with a diverse family of funds to let you switch among various investment strategies. Early last year, for example , you might have switched into a stock fund; now, however, with the market somewhat iffy, it would make sense to move at least some money to a money market fund or bond fund, both to take advantage of a possible rise in interest rates and to have a safe place to ''park'' while the market decides which way it wants to go.

People who have some background in a wide variety of investments may want to skip the banks, mutual funds, and insurance companies and open their own self-directed IRA at a brokerage. Here, you can select among everything the broker has to offer: stocks, bonds, limited partnerships, zero-coupon bonds. You can even get mutual funds and insured bank CD funds through your broker and switch your money back to stocks and bonds, if you like.

If you buy stocks for the IRA, however, there is one thing to remember: When you take the money out at retirement, any gains will be taxed as ordinary income , a higher rate than you would pay if the stocks had been held at least a year outside the IRA, making profits subject to the lower capital-gains rate.

Generally, a self-directed IRA should be used by someone with enough in the account to have part of it in a more conservative investment. Since IRAs have been available to all working people for just over two years, many people have all their money in one place. For a few thousand dollars, that may not be a bad idea.

But if a husband and wife are working and have made their maximum $2,000 IRA contributions for 1982, '83, and '84, they would already have saved $12,000, plus interest. They should diversify their IRAs as much as possible, with some in CDs, some in a mutual fund, then perhaps a self-directed account. As long as you don't put in more than $2,000 a year ($2,250 in a spousal IRA), you can have IRAs in as many places as you like. Even someone saving only a few hundred dollars a year will, with interest or dividends, eventually have enough to need diversity.