How to open a Roth IRA?
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jeffreyjrose
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Yes, you can set up a Roth IRA at a bank, but IMO, your choices are very limited, and in my case, fees were extremely high. Two years ago, I opened an account with Fidelity instead, and I have been very pleased with their services. I believe that they require a minimum of $2500 to open an account, but after that, you're golden. No annual fees and a flat $19.95 to trade stocks. I reinvest all of my dividends for free as well. The money that is in the Fidelity account, but not in stocks, goes into a money market account, currently earning around 4.5%-5%. Their research tools are fairly extensive and free for your use as a customer.
Bottom line: I would review the myriad of choices available online and pick the service that works best for you. I do 3-4 trades/year, and Fidelity suits me fine for my needs. If you are a more active trader, there may be a company more tailored to your needs.
Bottom line: I would review the myriad of choices available online and pick the service that works best for you. I do 3-4 trades/year, and Fidelity suits me fine for my needs. If you are a more active trader, there may be a company more tailored to your needs.
[quote name='jeffreyjrose']Yes, you can set up a Roth IRA at a bank, but IMO, your choices are very limited, and in my case, fees were extremely high. Two years ago, I opened an account with Fidelity instead, and I have been very pleased with their services. I believe that they require a minimum of $2500 to open an account, but after that, you're golden. No annual fees and a flat $19.95 to trade stocks. I reinvest all of my dividends for free as well. The money that is in the Fidelity account, but not in stocks, goes into a money market account, currently earning around 4.5%-5%. Their research tools are fairly extensive and free for your use as a customer.
Bottom line: I would review the myriad of choices available online and pick the service that works best for you. I do 3-4 trades/year, and Fidelity suits me fine for my needs. If you are a more active trader, there may be a company more tailored to your needs.[/quote]
I'm checking out fidelity now. I am so used to banking with a B&M bank that I tend to just want to house it all under one roof (so to speak). Thanks for the tip.
Bottom line: I would review the myriad of choices available online and pick the service that works best for you. I do 3-4 trades/year, and Fidelity suits me fine for my needs. If you are a more active trader, there may be a company more tailored to your needs.[/quote]
I'm checking out fidelity now. I am so used to banking with a B&M bank that I tend to just want to house it all under one roof (so to speak). Thanks for the tip.
dberuvides
Banned
[quote name='mtxbass1']I'm checking out fidelity now. I am so used to banking with a B&M bank that I tend to just want to house it all under one roof (so to speak). Thanks for the tip.[/quote]
I have Scottrade. Its only $7 per trade and only $500.00 ($2000 for a margin account) to open.
I have a ROTH, a Margin account and an options account with them. BTW never use a bank for anything outside loans and free checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPIDERS "SPY" which is an ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF. Remember reinvest the dividends it will make a HUGE difference in the long run.
I have Scottrade. Its only $7 per trade and only $500.00 ($2000 for a margin account) to open.
I have a ROTH, a Margin account and an options account with them. BTW never use a bank for anything outside loans and free checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPIDERS "SPY" which is an ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF. Remember reinvest the dividends it will make a HUGE difference in the long run.[quote name='dberuvides']I have Scottrade. Its only $7 per trade and only 500.00 to open. BTW never use a bank for anything outside loans and checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for non-mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPDIERS "SPY" which is a ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF and I promise you will have a great retirement!!!!!![/quote]
I fully agree with a bank being a rip-off. They told me I could get a whopping 0.35% interest rate on my money market account. I told them, no thanks.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?
BTW never use a bank for anything outside loans and checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for non-mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPDIERS "SPY" which is a ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF and I promise you will have a great retirement!!!!!![/quote]I fully agree with a bank being a rip-off. They told me I could get a whopping 0.35% interest rate on my money market account. I told them, no thanks.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?
jeffreyjrose
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[quote name='dberuvides']I have Scottrade. Its only $7 per trade and only $500.00 ($2000 for a margin account) to open. I have a ROTH, a Margin account and an options account with them. BTW never use a bank for anything outside loans and free checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPIDERS "SPY" which is an ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF. Remember reinvest the dividends it will make a HUGE difference in the long run.[/quote]
Very nice! I just spent a few minutes on Scottrade's website, and I am impressed. Their fees beat almost everyone else's. If only I had known of this earlier!
I have a ROTH, a Margin account and an options account with them. BTW never use a bank for anything outside loans and free checking accounts everything else is a rip-off. You're better going somewhere else like a deep discount broker like TD Ameritrade and Scottrade. Be warned, Fidelity is a Full Service broker and the commission is a whopping $35 for mutual fund trades that are not part of the Fidelity family of funds. BTW over the long haul timing the market doesn't work just put all your money into SPIDERS "SPY" which is an ETF that tracks the SP 500 or the Vanguard 500 "VFINX" which does the same as "SPY" but it is a mutual fund instead of an ETF. Remember reinvest the dividends it will make a HUGE difference in the long run.[/quote]Very nice! I just spent a few minutes on Scottrade's website, and I am impressed. Their fees beat almost everyone else's. If only I had known of this earlier!
dberuvides
Banned
[quote name='mtxbass1']I fully agree with a bank being a rip-off. They told me I could get a whopping 0.35% interest rate on my money market account. I told them, no thanks.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?[/quote]
Unless your over 50 you can only put 4000 per year in a Roth. $5000 starting in 2008. To answer your question YES. I'm a strong believer in paying everything at once car insurance, ROTH, health insurance. So if the at the start of each year you have the whole amount by all means put it all in. That way you don't have to worry about putting a little bit each month. I'm not a fan of the monthly payment/contribution mentality. I like to pay everything in full up front at one time. Except for a house which is a little too much money and a 401k because you are not allowed to.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?[/quote]
Unless your over 50 you can only put 4000 per year in a Roth. $5000 starting in 2008. To answer your question YES. I'm a strong believer in paying everything at once car insurance, ROTH, health insurance. So if the at the start of each year you have the whole amount by all means put it all in. That way you don't have to worry about putting a little bit each month. I'm not a fan of the monthly payment/contribution mentality. I like to pay everything in full up front at one time. Except for a house which is a little too much money and a 401k because you are not allowed to.
dberuvides
Banned
[quote name='jeffreyjrose']Very nice! I just spent a few minutes on Scottrade's website, and I am impressed. Their fees beat almost everyone else's. If only I had known of this earlier! [/quote]
You can have your account transferred and they (Scottrade)do all the paper work. It takes about 2 weeks. They have local offices all over the country that might be near you!!!
[/quote]You can have your account transferred and they (Scottrade)do all the paper work.
It takes about 2 weeks. They have local offices all over the country that might be near you!!!dberuvides
Banned
[quote name='mtxbass1']I fully agree with a bank being a rip-off. They told me I could get a whopping 0.35% interest rate on my money market account. I told them, no thanks.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?[/quote]
If your looking for a place to put cash try an online savings account like ingdirect.com. Currently 4.35%.
Is it better to make your max contribution at once, or build up to it? IE: If I had 5k to put in right this second, would it be better to do that now (and say at the start of every year) instead of spreading it out over the year?[/quote]
If your looking for a place to put cash try an online savings account like ingdirect.com. Currently 4.35%.
Mr_Happy
CAG Veteran
I have a Roth IRA with ScottTrade. Most of my stock is in SPY which tracks the S&P 500. The only thing I don't like about ScottTrade is that there is no way to transfer funds online to your account on it. They used to use eCheck for this, but eCheck was compromised last year so they dropped them. Right now to add funds to your account you need to have the money wired in or go to a local branch with a check, which is probably safer anyway.
dberuvides
Banned
[quote name='Mr_Happy']I have a Roth IRA with ScottTrade. Most of my stock is in SPY which tracks the S&P 500. The only thing I don't like about ScottTrade is that there is no way to transfer funds online to your account on it. They used to use eCheck for this, but eCheck was compromised last year so they dropped them. Right now to add funds to your account you need to have the money wired in or go to a local branch with a check, which is probably safer anyway.[/quote]
The manager at my local branch told me that an ACH system will be in place this fall.
The manager at my local branch told me that an ACH system will be in place this fall.
I'd suggest you put your Roth money into a good mutual fund. If you go with that advice your best bet is to open the Roth with the mutual fund company, IMO. Vanguard is my favorite mutual fund company, but there are many many others.
I believe with Van (and probably pretty much every other mutual fund company) you could do your initial buy with the account setup and then have a regular monthly contribution to even it out over the year yet still hit your max contribution for the year. I'd look for a company that doesn't have any charges other than possibly a small annual/quarterly maintenance fee. You shouldn't have to pay a transaction/commision fee for each periodic buy into the Roth for example. (Assuming you are going with mutual funds.)
And thanks for the heads up on no ACH with Scottrade. I would be so pissed if my broker lost that feature. I have stuff bought periodically and there is just no way that works without electronic fund transfers.
I believe with Van (and probably pretty much every other mutual fund company) you could do your initial buy with the account setup and then have a regular monthly contribution to even it out over the year yet still hit your max contribution for the year. I'd look for a company that doesn't have any charges other than possibly a small annual/quarterly maintenance fee. You shouldn't have to pay a transaction/commision fee for each periodic buy into the Roth for example. (Assuming you are going with mutual funds.)
And thanks for the heads up on no ACH with Scottrade. I would be so pissed if my broker lost that feature. I have stuff bought periodically and there is just no way that works without electronic fund transfers.
[quote name='dberuvides']If your looking for a place to put cash try an online savings account like ingdirect.com. Currently 4.35%.[/quote]
That's actually where a good chunk of it is right now. I give my bank a little, but I'm moving a large majority of that over to ING soon.
That's actually where a good chunk of it is right now. I give my bank a little, but I'm moving a large majority of that over to ING soon.
I'd suggest Edward Jones - specifically the American Fund. I've been investing in this Roth IRA for about a year now and I'm more than pleased. It is one of the ONLY Roth IRA's where over the past hundred years, in ANY 10 year period it has showed gains - including 10 year periods through the Great Depression, WWII, and the 2000 internet bust. Not a bad track record if I do say so myself.
I just opened a Roth IRA with Vanguard so I'll help answer any questions you have. Actually, I believe it was wubb that suggested Vanguard to me in a investing related thread a few months ago. The more I read about them the more I liked and I would recommend opening the account there too.*
I'll just describe what I did when opening the Roth IRA and you can ask me any questions you may have.
First I called Vanguard and requested they mail me a prospectus for various funds (free). I wanted to see what mutual funds I would invest in with my account. Then I used their site to open up a nontaxable account. There was step by step instructions and it was pretty easy. I decided to start with a small cap index fund which had a $3000 min to open. All of their funds except 2 or 3 have a $3000 min to open. I choose to make monthly payments until I reached the $4000 limit. The computer will automatically determine how much money per month to max it out, you just decide what day you want them to deduct it. There is a $10 custodian fee if your nontaxable account is less then $5000 but I plan on maximizing my contributions every year anyway. The expense ratio on my fund is 0.23% and there is no load/12b-1 fees/etc. After 2 business days they took the money out of my bank and started up the fund. After about 5 days I got a statement in the mail for opening the nontaxable account.
Some general stuff off the top of my head.
-First of all, you want a company with the least amount of fees possible. Even a expense ratio difference of .1% can really eat away at your savings over the long term.
-I went with a index fund because I don't have the knowhow or time to research various mutual funds and stocks trying to pick a winner. There's some good advice in this thread and in no way am I saying my way is best. What you invest in depends on your time horizon and how much risk your willing to take on.
-Banks usually invest your IRA money in higher yield IRA CDs. They might be safer then stocks but they don't make nearly enough money in the long run. If you are still young then you would be better off investing in mutual funds or stocks.
-Any interest/dividends/capital gains within your Roth IRA are tax-free if you've had the account for 5 years and you withdraw it after your 59 1/2. This was the reason I choice Roth over Traditional.
I was gonna type something else but it's getting late and my mind is starting to go to sleep ahead of me. I'll check back tomorrow.
*BTW wubb I understood why you liked Vanguard so much once I started learning more about them. Not only do they not have sale charges/12b-1 fees/etc but they have some of the lowest expense ratios I've seen yet. Even their actively managed funds are all less then 1%.
I'll just describe what I did when opening the Roth IRA and you can ask me any questions you may have.
First I called Vanguard and requested they mail me a prospectus for various funds (free). I wanted to see what mutual funds I would invest in with my account. Then I used their site to open up a nontaxable account. There was step by step instructions and it was pretty easy. I decided to start with a small cap index fund which had a $3000 min to open. All of their funds except 2 or 3 have a $3000 min to open. I choose to make monthly payments until I reached the $4000 limit. The computer will automatically determine how much money per month to max it out, you just decide what day you want them to deduct it. There is a $10 custodian fee if your nontaxable account is less then $5000 but I plan on maximizing my contributions every year anyway. The expense ratio on my fund is 0.23% and there is no load/12b-1 fees/etc. After 2 business days they took the money out of my bank and started up the fund. After about 5 days I got a statement in the mail for opening the nontaxable account.
Some general stuff off the top of my head.
-First of all, you want a company with the least amount of fees possible. Even a expense ratio difference of .1% can really eat away at your savings over the long term.
-I went with a index fund because I don't have the knowhow or time to research various mutual funds and stocks trying to pick a winner. There's some good advice in this thread and in no way am I saying my way is best. What you invest in depends on your time horizon and how much risk your willing to take on.
-Banks usually invest your IRA money in higher yield IRA CDs. They might be safer then stocks but they don't make nearly enough money in the long run. If you are still young then you would be better off investing in mutual funds or stocks.
-Any interest/dividends/capital gains within your Roth IRA are tax-free if you've had the account for 5 years and you withdraw it after your 59 1/2. This was the reason I choice Roth over Traditional.
I was gonna type something else but it's getting late and my mind is starting to go to sleep ahead of me. I'll check back tomorrow.
*BTW wubb I understood why you liked Vanguard so much once I started learning more about them. Not only do they not have sale charges/12b-1 fees/etc but they have some of the lowest expense ratios I've seen yet. Even their actively managed funds are all less then 1%.
I've looked at various Vanguard funds in the past (such as the Vanguard Viper). I just turned 25 and I want something I can be agressive with, but not have to worry about maintenance. The minimum deposit isn't a problem. Can you go straight to Vangaurd to open an account?
Yep, just go to vanguard's site and you can print off some PDFs to mail off to them. IIRC they even let you fill in pretty much everything on the PDF digitally before printing it out. cletus had the prospectus mailed to him, but you can download those as PDFs on their site as well.
cletus - Yep, especially for an index fund the expense ratio should be very small. No need to pay anything more than rock bottom % on those. And wow, I think they've raised their mins for IRAs in the past year or so. IIRC last time I looked the min for IRA accounts was just $1k for most funds.
Vipers are ETFs for Vanguard funds traded like stocks. If you open an account directly with them you'd be buying the fund directly and won't be dealing with the Vipers.
Vanguard is the Rolls Royce of index funds IMO. But an index fund isn't really what most would consider aggressive.
cletus - Yep, especially for an index fund the expense ratio should be very small. No need to pay anything more than rock bottom % on those. And wow, I think they've raised their mins for IRAs in the past year or so. IIRC last time I looked the min for IRA accounts was just $1k for most funds.
Vipers are ETFs for Vanguard funds traded like stocks. If you open an account directly with them you'd be buying the fund directly and won't be dealing with the Vipers.
Vanguard is the Rolls Royce of index funds IMO. But an index fund isn't really what most would consider aggressive.
[quote name='Kayden']I'm kinda confused. Whats the average gain? My banks money market account has 4.35-4.5% interest which is on par with a lot of these mutual funds you guys are mentioning.[/quote]
Which bank?
If it's an online bank, then I can see those kind of interest rates, however every single bank (brick and mortar) that I've looked at offered dismal returns.
Take wachovia for example. This was 3 weeks ago with thier money market account.
Balance Int Rate
0 .25%
2,500 .25%
5,000 .35%
10,000 1.98%
25,000 2.81%
50,000 2.96%
100k 3.44%
250k 3.49%
500k 3.54%
1mil 3.54%
bah formatting.
Which bank?
If it's an online bank, then I can see those kind of interest rates, however every single bank (brick and mortar) that I've looked at offered dismal returns.
Take wachovia for example. This was 3 weeks ago with thier money market account.
Balance Int Rate
0 .25%
2,500 .25%
5,000 .35%
10,000 1.98%
25,000 2.81%
50,000 2.96%
100k 3.44%
250k 3.49%
500k 3.54%
1mil 3.54%
bah formatting.
The stock market (which is what most of the funds mentioned here are based on) should outperform a money market fund over time. But over any given time frame they may not and may even lose a substantial amount.
For example if you look at Vanguard's 500 Index fund it's gained 8.5% over the past year, but from 2000 to 2002 it lost a lot of value. (And that's putting it mildly.)
If you have money that you want to leave invested for 7+ years it should be in the market IMO. For money that you might need in the next couple years, I'd absolutely leave it in a money market.
Of course, it should go without saying that you need to do some research on your own (or consult a pro) if you want to make informed decisions. I think it's not too much to do on your own and then you save the money you'd have to pay a pro for a higher investment seed.
I know some people who have really done well using a traditional broker and going with their advice, but I also know some people who have lost a bundle doing the same. If you do consult a pro, I'd ask him/her something like 'What kind of results should I expect?' and if they say anything along the lines of guaranteeing you won't lose money with them, I'd drop them quick.
For example if you look at Vanguard's 500 Index fund it's gained 8.5% over the past year, but from 2000 to 2002 it lost a lot of value. (And that's putting it mildly.)
If you have money that you want to leave invested for 7+ years it should be in the market IMO. For money that you might need in the next couple years, I'd absolutely leave it in a money market.
Of course, it should go without saying that you need to do some research on your own (or consult a pro) if you want to make informed decisions. I think it's not too much to do on your own and then you save the money you'd have to pay a pro for a higher investment seed.
I know some people who have really done well using a traditional broker and going with their advice, but I also know some people who have lost a bundle doing the same. If you do consult a pro, I'd ask him/her something like 'What kind of results should I expect?' and if they say anything along the lines of guaranteeing you won't lose money with them, I'd drop them quick.
Kayden
Banned
Here are the current rates for my bank http://guarantybanking.com/dratesMN.asp
Its a small midwest chain with only banks in Rainbows.
This is my MM account http://guarantybanking.com/ultimatemm.asp
Its a small midwest chain with only banks in Rainbows.
This is my MM account http://guarantybanking.com/ultimatemm.asp
jeffreyjrose
CAGiversary!
- Feedback
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[quote name='dberuvides']You can have your account transferred and they (Scottrade)do all the paper work. It takes about 2 weeks. They have local offices all over the country that might be near you!!![/quote]
Well, it's finally time to switch over to Scottrade. It will cost me $50 to close my Fidelity account, but I will save that in less than 4 trades at Scottrade. Thanks for the tip, dberuvides!!!
It takes about 2 weeks. They have local offices all over the country that might be near you!!![/quote]Well, it's finally time to switch over to Scottrade. It will cost me $50 to close my Fidelity account, but I will save that in less than 4 trades at Scottrade. Thanks for the tip, dberuvides!!!
[quote name='jeffreyjrose']Well, it's finally time to switch over to Scottrade. It will cost me $50 to close my Fidelity account, but I will save that in less than 4 trades at Scottrade. Thanks for the tip, dberuvides!!![/quote]
I'm looking hard at Scottrade myself. Schwabb is looking good though too. I can't decide what to do.
Fidelity has a thing now where you invest 10k and they give you an instant $100. I'm considering that one.
I'm looking hard at Scottrade myself. Schwabb is looking good though too. I can't decide what to do.
Fidelity has a thing now where you invest 10k and they give you an instant $100. I'm considering that one.
bread's done