Hello GRS!

I'm currently 22 years old and am trying to get myself set up for future retirement. I have a 401k that my company matches up to 6% so I have gone ahead and set that as my contribution limit.

On top of that I have recently opened up a Roth IRA last December at my local Credit Union (where also my checking and savings account are located). Honestly I just knew that it would probably be a good idea to open one and I thought that all I would have to do was drop money into it and it would earn a nice interest rate while my bank did all the work. Reading the recent blog post about Roth IRAs makes me think I was wrong about this assumption. Also, hearing the interest rates that some people are getting makes me think that opening a Roth IRA here may not have been the best choice - it's only 1.64%, so monthly I'm getting something like .13%. I've seen people talking about 5% or higher! Doing the calculations, I'm not going to end up with very much upon hitting retirement age (hopefully age 55.... we'll see).

Could someone provide some advice on what I need to do differently (or even point me to some helpful articles)? My bank didn't really give me a whole lot of information besides how my funds are handled if I were to die, and when I can start withdrawing, etc. I've heard of people using Vanguard, would that be a better choice for me?

You need to do a "direct transfer" to a low cost brokerage as soon as possible and get the money invested in stocks. At your age you should be 100% in stocks...others will differ, but that is my advice.

Opening a Roth was a good idea, opening it at a bank...not so much. Thankfully, its pretty easy to fix.

Also, your 401k should be in stocks too. If you are investing in "safe" bonds at your age you are putting your future purchasing power at great risk.

Keep reading about this topic and searching these forums.

Yes.

And I strongly suggest you start reading a great deal about personal finance. There are a lot of good books that people here will be happy to suggest. Before you get too worried about interest rates you really need to understand fees, mutual funds, and other types of investments.

You are not letting the bank do all the work. You are letting them use your money for almost free. It's kind of like lending them your car. You worked hard for the car. Don't you think you should learn to drive it?

Oh my gosh! No one should have an IRA at a credit union!!

You are so young, and you're investing like someone who's deep in retirement.

RUN away from your credit union. Vanguard is an excellent choice. Get stock exposure as soon as possible. You're on the right track, and it's great to save so young. Keep it up, but make sure you're investing in the stock market for a few decades. You'll do much better than in just cash.

Waiting to here back from a local financial adviser to set up an appointment ASAP. In the meantime I have been reading around. Yes, you guys are right that I have made an error in choosing to invest with my local credit union. Thankfully, it has at least got me started along that path, and I realized my error early on.

I just found this in one of J.D.'s Roth IRA articles, and now I feel dumb that I didn't see this before:



Thanks for being so quick to respond!

Don't stress about it. The important thing is that you got started. And this is an easily fixable mistake.

I wonder why banks even offer these things?