How to Start a Roth IRA (and Where to Do It)
Published on - June 7th, 2007 (Modified on - March 4th, 2013) (by J.D. Roth) You’ve heard how awesome Roth IRAs are and how starting one now can mean big bucks when you’re older. You’ve even done some research so you have a vague idea of how a Roth IRA works. Now what? How do you actually start one yourself? It’s surprisingly easy to set up a retirement account and to begin investing in your future.
Before you invest
Putting money in savings accounts for retirement is important, but there are other aspects of personal finance, and you should take care of two of them before opening a Roth IRA.
- Tuck away at least $1,000 for emergencies.
- Pay off your credit card debt. At the very least, make significant headway on your debt and have a plan for its elimination. (I chronicled my choice between debt and savings in April.)
Here’s one excellent way to begin your retirement savings: When you’ve finished paying off your debt, take the amount you were using for this each month and, instead of spending it, stick it into a retirement account. You’ve already developed the habit of using the money to improve your financial life; this is just another way to do it!
Where to open a Roth IRA
Deciding where to open your Roth IRA is the most difficult part of the process! Many financial institutions offer IRAs. Each place has its own strengths and weaknesses. It’s important to search for a company that suits your needs. Don’t fret about finding the perfect match — find a good match and then get the IRA in motion. Questions to ask during your research include:
- Is there a minimum initial investment? Minimum contributions?
- What sorts of fees are assessed to the account?
- Does the company offer automatic contributions?
- What investment options are available? Can you invest in stocks? Mutual funds? Real estate?
- Is it possible to download statements automatically into Quicken?
- How reputable is the provider?
If you already have an investment advisor, ask her for recommendations, but look for other options, too. Some banks and credit unions offer Individual Retirement Accounts. My credit union, for example, has Roth accounts, but they’re limited to certificates of deposit at 1.50%. ING Direct offers Roth IRAs (ING direct is now Capital One 360) with a $10 annual fee and no other commissions or fees. Their investment minimums are low, but their universe of funds is very limited.
If you’re willing to make some decisions on your own, you can open a self-directed IRA through a mutual fund company or through an online discount brokerage.
The Big Three
In his guest post “An Introduction to Mutual Funds”, Vintek recommended starting at one of the Big Three: Fidelity, Vanguard, or T. Rowe Price.
I call these fund families the Big Three not only because they’re enormous, but also because they have a variety of funds that cover every investment style and segment you could wish for. [...] If you’re just starting out, you should probably pick one family and stay with it. You’ll be able to track all your investments more easily in one place.
I explored each company’s web site to discover what sorts of Roth IRA options they offered for beginning investors. Here’s what I found.
Fidelity Investments offers a no-fee IRA. There’s a $2,500 minimum initial deposit, but this is waived if you commit to $200/month automatic contributions. They offer 4,500 mutual funds, about a quarter of which have no transaction fee. In short, you can open a no-cost IRA at Fidelity with a $200 starting investment if you invest in mutual funds and you agree to contribute $200/month. Apply for a Roth IRA with Fidelity.
It’s also possible to open a no-cost Roth IRA at The Vanguard Group. To do this, you must elect to receive electronic statements and start with $1000 in the company’s STAR fund. (The STAR fund is an mutual fund of mutual funds, a safe choice for beginners.) Additional contributions require a minimum of $100 unless you use their Automatic Investment Plan, in which case the minimum is $50. There are no fees to purchase the STAR fund. Start a Roth IRA at Vanguard.
T. Rowe Price charges $10/year for Roth IRA accounts until you have a balance above $5,000, after which there is no fee. You need $1,000 to open your IRA, but this minimum goes away if you sign up to contribute at least $50/month with the Automatic Asset Builder. There are no sales fees or commissions to invest this money in T. Rowe Price mutual funds. Open an IRA at T. Rowe Price.
The information here will get you started with the minimum investment and the lowest costs. If you have more money at your disposal, you have more options. It’s possible to make much more sophisticated trades with each of these places — purchasing stocks, for example — but not for free. I encourage you to look more closely at each company’s web site, and to read the literature for each investment you consider.
Discount Brokers
Discount brokers appeal to many people because they have a low barrier to entry. They offer lower fees than traditional brokers because they don’t have research departments and they don’t offer investment advice. They only act as middlemen for trading in the market.
I opened my Roth IRA at Sharebuilder after reading David Bach’s The Automatic Millionaire. It felt great to finally open a retirement account. (Seriously — I was stoked.) Now, though, I fret about the costs. Sharebuilder charges a $25 annual custodial fee for a Roth IRA, plus $4 every time I make an automatic investment. (Other transactions cost $15.95!) Because I’m careful, I’m not hit with a lot of fees. Though I love how easy it is to automate investing through Sharebuilder, my research for this article revealed two other discount brokers that look appealing.
People have all sorts of good things to say about Firstrade. This company offers a no-fee Roth IRA, but requires a $500 minimum initial investment and $100 subsequent investments. Firstrade charges $6.95 per transaction, though they do offer a wide range of mutual funds that one can purchase for no charge. Firstrade looks good for somebody who wants to invest in mutual funds, but doesn’t want to (or can’t afford to) sign on with a larger mutual fund company. Firstrade does not offer online registration, but you can begin the Roth IRA application process here.
Zecco
, the new kid on the block, charges $30 a year to carry a Roth IRA. That’s it. There are no other commissions or fees unless you’re a very heavy trader. There are no minimum balances or contributions. From what I can tell, the Zecco investment universe includes most stocks and exchange-traded funds, including some tasty Vanguard index funds. Open a Roth IRA at Zecco.
Discount brokers are a good option if you’re primarily interested in purchasing individual stocks instead of mutual funds. They’re also a fine choice if you want to get started now, but can’t afford a program with one of the mutual fund companies. Another option if you’re short on cash is to open an CD-based IRA at a bank until you’ve saved enough for the minimum initial deposit at one of the Big Three.
How to open a Roth IRA
Here’s a secret: opening a Roth IRA is easy. Have you ever filled out a job applicaton? Have you ever applied for a credit card? Have you ever opened a bank account? Of course you have. That’s exactly what the process is like to start an individual retirement account.
Some firms require that you download the forms and then to mail or fax them to the company. Most places, however, provide online applications. Before you begin the application, you will need the following:
- Your social security number.
- Your bank account information.
- Your employment information.
- Some money. (Depending on where you choose to open your IRA, or you may need $25 or you may need $3000. )
- About an hour of uninterrupted time. (Actually, you probably only need fifteen minutes, but allocate more time just to be safe.)
Gather this information in one location when you’re ready to begin. (If you’re opening an IRA through a brick-and-mortar bank or broker, take this info with you.) From this point, it’s simply a matter of answering simple questions. (English Major has a walk-thru of opening an IRA at Vanguard.)
Once you’ve completed the application process, you will be asked to transfer money to your account. This money will probably earn interest in a money market fund until you choose an investment. (In part three of this series, we’ll discuss good investment options for Roth IRAs.)
I’m a big fan of automatic investment plans. Most of the companies I mentioned earlier in this article offer some sort of program that will pull money from your bank account every month to invest in stocks or mutual funds that you designate. By setting aside $50 or $100 or $500 in this way, saving becomes a habit. You don’t notice the money is missing. It’s a regular expense becomes incorporated into your budget.
Now what?
That’s all there is to it. Really. The most difficult part of this process is deciding where to open an account. Set aside an hour or two some Saturday morning to explore your options over a cup of coffee. With some research, you should be able to find a company and program that fits your place in life.
I always believed opening a retirement account difficult. “Besides,” I thought, “I don’t have money to invest.” Last year I forced myself to find the time and the cash to open a Roth IRA, and it has been one of the best financial decisions I’ve ever made. My account balance is small, but I love to watch it grow!
| The GRS Introduction to Roth IRAs series Part 0: How compound returns favor the young Part 1: What is a Roth IRA and why should you care? Part 2: How to start a Roth IRA (and where to do it) Part 3: Which investments are best for a Roth IRA? Part 4: Questions and answers about Roth IRAs |
Remember: I’m just learning about IRAs myself. I’m sure to have missed some things. Fortunately, there are some sharp Get Rich Slowly readers out there to clear up mistakes. (I’ll incorporate corrections into the body of the post.)
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Hello, just found this site thru a link from LifeHacker. I’d say the article is very through and well-written, but I have some serious concerns about some of the statements and implicit assumptions in the comments. Please forgive me for some of the harsh comments below. Here are my thoughts:
1. Roth IRA v. Traditional (deductible) IRA v. 401(k).
I didn’t see anyone mention this, but one of the best retirement savings vehicles in the 401(k) (or 403(b)), if your employer sponsors one. The advantages of contributing to a 401(k) is the higher limit ($15,000/yr v. $4,000/yr), and most employers automatically match your contributions, so it’s free money (or an instant investment gain on your contributions). You can also contribute to a Roth IRA if you participate in a 401(k)/403(b).
Assuming you don’t have a 401(k)/403(b), the question is whether to use a Roth IRA or a traditional IRA, where the Traditional IRA will provide you a tax deduction in the current year.
BTW, with the exception of a 401(k) that has an employer match, I’d pay off high interest debt before starting an IRA. Your returns in the IRA will be swamped by the 12%+ interest rates on your credit cards, etc.
2. Borrowing money
Someone mentioned borrowing money to fund your retirement. Unless you receive a 0% loan, this makes no sense, since any earning in your retirement fund(s) will be eaten by the interest paid on the loan. Plus, if it’s a Roth IRA, you didn’t get any immediate tax benefit either.
3. Sharebuilder
I probably in the minority with this view, but I think buying individual securities/ETFs is a stupid idea for smaller (
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(cont. sorry posting problems)
3. Sharebuilder
I probably in the minority with this view, but I think buying individual securities/ETFs is a stupid idea for smaller (less than $75,000) accounts. I’ll use Sharebuilder since it was mentioned in the comments. Paying $20/month = $240/year in fees!!!! Let’s assuming you’ve been contributing to your IRA for a few years, and the balance is $10,000. Your “expense ratio” for this account is a whopping 2.4%!!! You’re basically down 2.4% for the year before you’ve even started investing!! This expense ratio is worse than the worst mutual funds. And for those thinking, “Well, I trade a lot, so it’s worth it,” studies have shown that these people end up with smaller gains than those who buy diversified mutual funds and hold them for a period of time! Also, most people will either (1) forgot/get bored of trading, and will end up with crappy securities in their portfolio; (2) with such small accounts, will be highly concentrated in a few companies; (3) won’t have the stomach for significant stock price swings, and will end up selling at the worst time (again, there was a study on this).
I think for smaller accounts, one should stick with low-cost, diversified mutual funds.
4. The ING Roth IRA
I think the ING Roth IRA is a terrible recommendation. True, they have a low initial investment of $250 vs. $1,000 or more at Vanguard, T.Rowe, Fidelity, but the expense ratio (what you pay indirectly every month to the mutual fund) are exorbitantly high. Take for example, their balanced fund — expense ratio of 1.40% — it’s seven times (700%) more expensive the cost of the equivalent Vanguard fund at 0.20%. 700%!! People you pay this indirectly, and the more money you have in the fund, the more you pay! And you pay this every year (month) for as long as you invest in those funds. Remember, the ING fund has to perform significantly better than the Vanguard fund due to the drag of the expenses. Generally, if you are starting out in investing, pick low-cost, diversified funds from Fidelity, T.Rowe, or Vanguard. If you can’t meet the initial investment amount, save cash in a high-yield savings account until you accumulate enough to start your IRA, or use the monthly investment options. The Vanguard STAR mutual fund, for example, has a $1,000 minimum, and it a very diversified fund. Also, some MF companies will waive annual fees if you agree to receive electronic statements.
5. Investments in IRAs
There was some discussion about using IRAs/401(k)s/403(b)s to shelter certain types of investments, specifically those that throw off significant dividends or short-term capital gains. I think this is a great strategy if you have significant holdings outside of your tax-sheltered accounts. (Of course, don’t ever put Municipal bond funds in a tax sheltered account)! However, for those with less complex portfolios, this point is moot. Buy low-cost, diversified mutual funds in your IRA.
6. Savings / Emergency Cash
Everyone made great points on building a emergency reserve. This is so critical, since this will keep you out of credit card debt if any unforeseen events occur. Getting into CC debt is one of the worst wealth destroyers out there. Since this is emergency cash, don’t put it in an IRA!!! You’ll end up paying significant penalties if you withdraw from an IRA before retirement age. Instead, place your cash in a high yield FDIC-insured savings account. My favorites are EmigrantDirect ; HSBCdirect ; INGdirect.
Investing is a passion for me, and I hope it will become the same for all of you. Please be sure to do your own research before investing. I don’t work for any of the companies I mentioned above. I do invest with one of them. Thanks for reading!
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This post comes at a great time for me as I’m currently in the process of establishing my own Roth.
Thank you for compiling this information, JD!
=^..^=
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Great post. I’ve already got a Roth set up, but this is useful information to pass on.
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SecularSage:
what I recall from the paper work I recently filled out to transfer an IRA from one institution to another was that if you wanted to transfer a 401k to a ROTH, you first had to move it to a “regular” IRA, and then do the conversion to Roth as a second step. (BTW, this was at Vanguard.)
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@Driver8: I’ll use Sharebuilder since it was mentioned in the comments. Paying $20/month = $240/year in fees!!!! Let’s assuming you’ve been contributing to your IRA for a few years, and the balance is $10,000. Your “expense ratio” for this account is a whopping 2.4%!!!
Alternatively, on Jared Teem’s “$10/week of available cash”, a $20/month fee amounts to a nearly 50% sales load.
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I believe JD in # 45 is correct. Roth contributions can be withdrawn without penalty. I am pretty sure if there are any penalties, it would only apply to earnings, not contributions.
#40,
I pretty much agree. At least I don’t think a very large Emergency Fund makes any sense. J.D’s $1000 seems reasonable. People wanting to have $20,000+ Emergency Funds make no sense to me unless they have really high living expenses. For someone with modest expenses and modest retirement funds, it seems a waste to have a large sum of money sitting around not doing anything. Especially in my case where I plan to have 40+ years of time to buildup my retirement funds.
I don’t know if I am mathematically correct( i think so, but not sure)..but for the people who like to talk about the mental/emotional element of investing- to ME retirement investing is more important than both an Emergency Fund AND Being Debt Free. I think one can tackle all at the same time, but I’ll take Retirement first.
I feel like if I dont invest $4000 this year, that a huge missed opportunity I can’t get back. If I use a Retirement calculator and see what that $4000 might be 30-40 years from now and how much difference missing 1 year can make…ouch.
Emergencies- Being Frugal kinda IS an Emergency Fund for me. At any point I feel like I can make enough money to get by somehow. I have low enough expenses, for example, if I had to find a job I wouldn’t have to be picky. I could probably sell enough stuff on ebay to live for several months,etc. I guess as long as I am insured against catastrophies as best I can, I have the emergencies covered.
Debt Payoff- Well I don’t feel that bad if I have to carry a small amount of debt. Maybe this is emotional- but I see retirement as Compounding, and Debt as getting paid off regardless of what I do ( as long as I dont add to it). In other words, I think investing $4000 towards retirement will return much more than paying off $4,000 in debt. If I have debt ( I Don’t have any revolving personal debt, FWIW) and I am already budgeting to pay it off, its getting paid off-especially if I can maintain the same payment or inrease it as finances allow. Of course I don’t WANT to be in debt, but it’s not as emotional to me. Plus I think debt can be a short term help in case of emergency ( and possibly cheaper in some ways than cash sitting around). For example, I’d rather charge things than starve, have utlities cutoff ( and incur late fees and reconnect charges,etc), etc. If it’s short term its cheap anyway.
Maybe i’m just insane, but if I maxed out my Roth today and then found myself with no money tomorrow ( or only $1000 and a bunch of credit cards), I would still be glad I funded my retirement.
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Where is this $20/month for Sharebuilder thing coming from? I’m confused.
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On the Sharebuilder site I see something called Advantage for $20/mo but also a Free basic ( with $4 per trade).
sharebuilder dot com/sharebuilder/Fees/Default.aspx
I have heard of Sharebuilder,but am not that familiar with it. I have only used typical discount e-brokerages and bought full shares or no fee Index Funds with automatic reinvestment,etc.
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Greg C. — I think, from what I’ve read, that the amount of money someone wants to have in their emergency fund depends somewhat on how many categories of “savings” that person has. I’m working on saving up an emergency fund, as well as setting aside a little money each month for other purposes. This includes a budget for car maintenance. That way, if I have an expensive repair, I can pay for it, without having to build up a huge emergency fund. But if I were to only be saving up an emergency fund and money for investments/retirement, then the emergency fund would have to be bigger, because it would have to cover more *kinds* of emergencies: medical emergencies, a break-in at home, car emergencies, travel emergencies. I think it depends on what constitutes an emergency for different kinds of lifestyles.
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[...] How To Start A Roth IRA And Where To Do It This is an excellent article for anyone thinking about a Roth IRA, but not really knowing where to start. I have mine through Vanguard, by the way. (@ get rich slowly) [...]
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If you want Vanguard and their low fees in a Roth but can’t afford the $3k min for most funds, pick the STAR Fund. It only has a $1,000 minimum and is a very diversified (20-30% bonds) and well allocated (has growth, value, large, small, and international coverage) fund of funds. You can’t beat getting a piece of those 11 different funds for the price.
The expense ratio is only about 0.35% with no load. The 15 year annualized return* on that is 10.38% with a standard deviation of 0.096. I dare you to find something that beats that return with a risk that low.
*Past performance blah blah blah
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I love Vanguard and love that my Roth IRA is with Banc of America Investments. Let me tell you why.
First I started my Roth IRA nearly 5-years agio with $50. Thats right, $50. Now I couldn’t buy into a Vanguard Mutual fund then, but at least I could START the process with only $50. That is sweet. The money simply sat in a money market account making probably 4% until I gathered up the rest.
Now here is where the deal sweetends even more. Through Banc of America Investements, I am allowed to buy a mutual fund to start with ONLY, get this…..$1000. That’s right, Banc of America and Vanguard must have some deal worked out where this is allowed. I was able to purchase Global Equity with only $1000, Small-Cap Value for only $1000 and so on. The additonal investments were in increments of $250. This REALLY helped me get my feet of the ground with growth from the start as I was investing in far better funds than the standard ‘Star’ fund.
On to Sharebuilder. I don’t have a Roth there, but a freind does and I have a brokerage account there. Where they get you is if you want to purchase stocks at anytime YOU want to. They charge $15.99 a trade, but if you simply allow them to purchase your funds/ETF/Stocks on Tuesdays, they will do so for $4. Now here’s the trick and catch, the first part already eliminates folks with that structure, but where they trap folks is when you buy $25 in an ETF and pay a commission of $4. Folks with Sharebuilder accounts have the option of purchasing stocks at very small amounts, but we have to be smarter than that and at MINIMUM only buy stocks above $150 to get that up front sales fee low.
Again, I got a sweet deal with that Roth IRA and I am unsure if anyone else has this same situation. And I do have a good chunck of my money with Bank of America, so I am not sure if that helps with me being allowed to purchase ALL of Vanguard funds starting at $1000.
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Luke:
1) Vanguard raised their minimum from $1k to $3k two years ago. The STAR fund is still $1k. Has nothing to do with BoA.
2) The STAR fund has coverage of those “better funds” asset classes you mentioned and then some. Plus it is well diversified.
3) Its a lot less risky to build your portfolio with the STAR rather than adding high risk asset classes 1 at a time. And unless you’re lucky, you’ll get a better return. Don’t believe me? Read more here: http://www.efficientfrontier.com/
4) Once you build the Roth account to a critical mass of $30k then you can look at getting as fancy or simple as you want with allocation. See example here: http://www.fundadvice.com/
Just one idiot’s opinion.
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I hear ya about your approach, but I am still allowed today to purchase a NEW Vanguard Mutual fund other than the ‘Star’ with only a $1000 minimum. That MUST have something to do with my connection with Bank of America, no?
You go to Vangaurd and it will cost you $3000 to open up th Target Retirement 2035, but I can do it with $1000 through Banc of America Investments. The barrier to entering a “high risk asset” as you call Global Equity I assume, is only $1000 for me and $3000 if you do so through Vanguard itself. Having the ability to start any fund with Vanguard for $1000 is far better than your option of having to start a Vanguard fund with $3000. I guess that was my point.
As far as the ‘Star’ fund, that is only 60% in stocks and I am far to young to be playing the slow growth game. Yeah it has a good balance, but 25% in bonds? There are far better funds than Star from Vangaurd.
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@Luke:
Are you sure BofA isn’t charging a sales fee? I went to their site, and Vanguard funds aren’t listed in the No Transaction Fee table. For non-NTF no-loads, it shows a $45 fee:
https://www.baisidirect.com/Static/SelfDirected/Commissions/commissions.html
Just curious…
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Hey Driver8…
I can assure that when I buy 100 shares of a Vanguard fund at $10, for example, to begin my position, I have never been charged $45 or even $10 or ANY fee. Like I said, I have been able to get into Vangaurd funds for a few years now for $1000 and NO sales fee or back end fee.
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What’s missing from your post are any of the “socially responsible” funds like Calvert. For those of us trying to avoid those who invest in say, companies benefiting from the genocide in Sudan, that’s important. For example, Fidelity right now is under fire for its investments in Petrochina, which in turn is making money from investments in Sudan, which in turn is using that money to fund the genocide in Darfur.
I’m not trying to push others to get out of Fidelity or Berkshire Hathaway (another Petrochina investor), but for those of us not wanting to get “in,” options like Calvert would be nice.
Thanks for an otherwise great post!
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[...] Rich Slowly offers tips on How to Start a Roth IRA (and Where to Do It). [...]
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[...] Retirement Savings: Setting up a Roth IRA Some good info on getting your Roth IRA going. (from Get Rich Slowly) [...]
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[...] How To Start A Roth IRA And Where To Do It This is one of the newest entries there and I linked to it in the rather recent past, but it is one of the best personal finance “how to” articles I’ve ever read. If you’ve ever even thought about getting started with a Roth IRA, this article is a must-read. [...]
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[...] –Get Rich Slowly has a good article on how to start an IRA. [...]
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JD–
This is a great article, with one exception: Please take out the recommendation for the ING IRAs.
I love ING. I use them for savings, checking, and CDs now. Their web site and customer service are excellent. However, their IRAs are stupidly expensive and don’t perform well enough to make up for that. The beginner is much better off putting money in an ING savings account or CD until they reach a discount broker’s minimum.
Someone who’s more used to this stuff might decide they like an ING fund enough to invest in, but given their high expenses I really think you need to know more to make a good decision. ING funds are not a slam-dunk the way a broad index is.
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[...] How to Start a Roth IRA (and Where to Do It) (tags: money finance investing retirement Roth ira reference tips) [...]
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Sharebuilder is way too expensive, *especially* for beginners whom it panders towards. First of all, their website is sub-par. In order to sign in successfully, you must go to their website, click on their logo, THEN log in, otherwise you will be greeted with an IIS server error message. Yes, this is the official remedy, I emailed them about this. The programming/backend on the rest of their site is also not confidence inspiring, I won’t go into more detail.
Second, if you are trying to trade EFTs and mutual funds, do yourself a favor and invest in index funds with low expense ratios and low turnover. Vanguard offers some very nice choices. The key to average-joe investing is to buy the market and hold forever. Very few EFTs and mutual funds beat the market consistently year after year, and then there are the expense ratios and buy/sell fees you pay to the broker.
Unless it is your profession, leave active trading and hand-picking stocks to the day traders (the VAST majority of whom lose money and go home/quit, btw). Educating yourself to manage risk well enough to beat the market is a full-time job. For the vast majority of the public, go the no-fee/low expense ratio index fund route. For more info, google “expense ratio” and read “Common Sense Investing” by John C Bogle, founder and ex-CEO of Vanguard.
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Hi,
I will be opening a IRA but I am confused about the amount of mutual funds the bank offers (in the particular account). For example, ING Direct offers six funds to choose from, and other banks offer only 5. What is the differnece? Should I consider the one with 6 mutual funds to invest with or is it important?????????
Also, my parents are 52years old and they want to open an IRA, should they go for the ROTH IRA or the traditional IRA? They have a steady income every month and own their business, what should they do?
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[...] If you’re new here, you may want to learn what this site is about. I encourage you to subscribe to my RSS feed. Thanks for visiting!This is part three of the GRS introduction to Roth IRAs. You may wish to begin with parts one and two. [...]
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[...] How to Start a Roth IRA (and Where to Do It) (Get Rich Slowly) [...]
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[...] “How to start a Roth Ira” from Get Rich Slowly. I just opened a Roth IRA with T. Rowe Price and just made my first $50 monthly investment today. I’m happy with them so far. [...]
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I use Fidelity for my IRA, but not a Roth. I have a traditional IRA. Before you decide which way to go, check out some of the online calculators. Based on one’s age, income, when one starts contributions, and when one plans to retire makes a BIG difference on which IRA to use. For me, a traditional IRA makes more since, mainly due to starting late, and present tax situations. (assuming taxes will be lower when I retire….Don’t shoot me, I know what ASSUME means).
If you have a qualified roll-over, you can use it instead of a minimum deposit or monthly contribution. I rolled my 401k and have no issues. I linked my Fidelity account to a Capital One savings account where I have money transferred each payday. When I wish, I can transfer a chunk to the Fidelity IRA and then invest the cash any way I wish.
I choose not to make automatic contributions to “average buy” any stock, bond, bill, or fund, because I feel I can do better and have. In the last 12 months, I have realized a return of over 31% by buying a Fidelity fund wisely….when the fund is right to buy, not when it’s average to buy. While I might not be so lucky in the future, I have about 23 more years to get it right…..I think my investments have a chance of making more in that time frame.
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[...] How to start a Roth IRA and where to do it [...]
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I’m a college student working for the summer and will make about $5000 before taxes at an internship this summer. Thankfully my dad pays for my tuition but I was just wondering if this makes me ineligible to open a roth ira or not?
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I have $18K “sitting” in a 401K account from a previous employer. I want to roll over into an IRA and possibly a Roth IRA. I am also interested in high interest savings accounts that I read about on this site. Not sure of the requirements. I am 40 yrs. old and getting a late start in savings/retirement planning. (I do have a retirement plan with current employer.) What are your suggestions?
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[...] the past month, I’ve covered the basics of Roth IRAs. I’ve explained what they are, how (and where) to open one, and which investments are best. Today in the final part of this series, I’m going to answer [...]
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I have a severely underperforming roth ira of 4 years (my more recent funds are doing much better). I want to sell it and open up with another fund. Any taxes/fees/etc. involved in that move? Any literature about it?
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Don’t underestimate the importance of large emergency funds (ideally 6 months wages if you have just started a family).
My job didn’t take me back F/T after my maternity leave (long story) and it took me almost a year to get a F/T job while I had a new baby to take care of…If that wasn’t hard enough, my husband was laid off when my son was only 4 months old.
We ended up 10′s of thousands (more) in debt. Take heed and prepare. We had entered all this already with a new mortgage, my student loan debt, and home improvement debt accrued when we got the house and needed to get appliances, furniture, new floors/carpet, and then later baby expenditures.
Worse possible time to lose your income…After 2 years of already accruing family-home setup debt. Hind-site is 20-20.
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I have read each and every one of these comments and I think everyone has great advice. My situation is the following:
I’m 23 years old, my husband is 30, he has three children from a previous marriage and the youngest won’t turn 18 until 2020. We own a home and have no credit card debt. We do have a $1200 mortgage payment,$140 HELOC payment and $900 combined car payments. We make about 72K before taxes and realize that we need to start an IRA very soon. The problem is that we don’t just want to start one for the sake of staring it and don’t diversify our portfolio correctly. We can definitely do automatic payments of $200 monthly but need a realistic goal of how to manage the account because we don’t want money just “sitting” there as some people have mentioned. We are also full time college students and strapped for cash. Please advise.
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[...] How to start a Roth IRA (and where to do it) [...]
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[...] of research could end up saving you $50 a month, and if you started putting that much extra into an IRA at age 22, then by the time you were 67, you’d have built up $575,000 (assuming a 10% annual [...]
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i don’t believe usaa has any fees, and $250 is th eminimum investment
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I’m a little younger and originally set up a traditional IRA, but have been advised to set up a Roth IRA in addition. Is it safe to set up a traditional and Roth IRA with the same company (currently with Fidelity) or should I do with two different ones just in case something would happen to Fidelity. Thanks!!
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I am ordinarily resident in the UK, but domiciled in the US. All of my earned income is in the UK (I pay UK income tax and declare my UK earnings on my US income tax form). I have some small income from investments and may in the future have rental income from a US property. Can anyone out there tell me whether I am eligible at all for an IRA or Roth IRA? Does rental income count as ‘earned’ or ‘unearned’ income? Thanks! Thanks also for the interesting reading on the subject.
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[...] How to start a Roth IRA (and where to do it) [...]
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Trying to decide on Roth IRA, or regular IRA.
On a regular IRA, if you put in approx. $75, Uncle Sam puts in $25. (That’s about 25% of the total: $100.
Both Your $75 and Uncle Sam’s $25 gains interest for multiple years till you retire.
I don’t understand why a Roth IRA is better.
You are gaining interest on Money you would have paid to Uncle Sam.
I just don’t get it.
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Thanks for the info in your site. I’m just starting to get serious about my finances, and since my occupation typically doesn’t have benefits and retirement plans, and since I’m starting a bit late in life (36 y.o.), it is easy to feel overwhelmed, and to procrastinate even more. I like how you break things down to the basics, using yourself as an example to share the decision making process.
Now I feel that I CAN take charge of my money and retirement savings, and I’m taking baby steps already!
Jared Teems – wow, I’m so impressed. I’m guessing you are a college student? The fact that you are only 18 and making minimum wage, inspires me that if you can invest in retirement, then I can too! Sounds like you have a good head on your shoulders, and will do well in life. I only wish I had started at your age!
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[...] #3: Looked a bit into Roth IRAs after reading Get Rich Slowly’s articles on them (link is to one of the most basic). Planning to do that in a few months [...]
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[...] How to start a Roth IRA and where to do it [...]
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[...] 0: How compound returns favor the young Part 1: What is a Roth IRA and why should you care? Part 2: How to start a Roth IRA (and where to do it) Part 3: Which investments are best for a Roth IRA? Part 4: Questions and answers about Roth [...]
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Zecco actually charges $10 for mutual fund trades, whereas the first 10 ETF trades would be free.
TDAmeritrade’s Izone is a lot cheaper if you’re buying mostly mutual funds and they also dont’ have annual maintenance fees for retirement accounts.
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Has anyone looked at opening an IRA with or had any previous experience with Janus? I’m considering opening a Roth IRA with them but was wondering if anyone here had any comments about them. Their website says that a person can open an Roth IRA with a $1,000 minimum initial investment; $500 minimum if you sign up for a $100 or more monthly automatic investment plan. As far as fees, their website says, “Janus does not currently charge any custodial account fees for opening or maintaining your Roth IRA.”
Link:
https://ww4.janus.com/Janus/Retail/StaticPage?jsp=jsp/Account/TypesOfAccounts/RothIRAAccountType.jsp
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