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Offlinegluke bastid
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Choosing a Roth IRA
    #8419685 - 05/19/08 11:02 AM (15 years, 8 months ago)

I know I want to open a Roth IRA. I have no idea what bank to use or what I should look for. Does it make a huge difference as long as the bank is FDIC insured and has a competitive interest rate? Anything I should watch out for? Any recommendations?

Thanks Shroomery


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:hst:
Society in every form is a blessing,
but government at its best is but a necessary evil
 
- Thomas Paine


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InvisibleVeritas
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Registered: 04/15/05
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Re: Choosing a Roth IRA [Re: gluke bastid]
    #8419767 - 05/19/08 11:30 AM (15 years, 8 months ago)

Are you planning to use retirement CD's for your Roth funds? This is not a terrific choice, though it is FDIC insured & you have no risk to your principal.

I'm assuming that you are in your 20's, which means you are decades away from retirement. With this time window, you need to be in mutual funds, not bonds or CD's.

Rather than go into a long explanation, I'm going to link you to the pertinent information:

http://bankrate.com/brm/news/retirementguide2007/20070501_Dr_Don_retirement_tips_a1.asp

My Roth is with ING Direct, because it was the simplest and least-expensive way for me to get started.


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Offlinegluke bastid
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Re: Choosing a Roth IRA [Re: Veritas]
    #8419785 - 05/19/08 11:37 AM (15 years, 8 months ago)

Thanks, but my thread on CDs was just a random question. I am not planning to buy any CDs. But yes, you are correct I am in my mid 20s and I would like to open a Roth IRA. Are you saying I should get into a mutual fund and not bother with an IRA? A Roth IRA seems to be a good choice because I am positive that (as long as I am still alive) I will be making more money in my future than I will be now. I'm shying away from a mutual fund because I don't really feel like dedicating the time it takes to monitor a mutual fund. I would rather set up my investment into an IRA and not think about it constantly.

There is a ton of free advice about IRAs on the internet but there doesn't seem to be any advice on how to know which banks offer the best ones. This is still what I'm after.


--------------------
:hst:
Society in every form is a blessing,
but government at its best is but a necessary evil
 
- Thomas Paine


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InvisibleVeritas
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Re: Choosing a Roth IRA [Re: gluke bastid]
    #8419833 - 05/19/08 12:03 PM (15 years, 8 months ago)

An IRA is just a set of restrictions placed upon a savings or investment account.  You can hold your IRA funds in a CD or Money Market account, in which case they will be FDIC insured and pay a variable rate of interest.  You can also invest your IRA funds in stocks, stock mutual funds, bond funds, etc...

Many investment firms allow you to select a portfolio of mutual funds which will be adjusted as you near retirement.  Basically, you want to maximize growth (and thus incur more risk) when you are younger, and gradually shift towards less risk as you near retirement.

Here's the fund in which my Roth IRA contributions are being invested:  ING Direct Strategic Allocation Growth.    I chose this fund because it has a low expense ratio, a low annual fee & it is appropriate for my years-to-retirement status.  It recently became a fund-of-funds, which means that it invests in other mutual funds, rather than buying stocks directly.

Most banks offer CD or Money Market options for IRA accounts (BTW IRA = Individual Retirement Arrangement, so it is not redundant to say IRA account.  :grin:).  A few will offer investment options through a subcontracted brokerage firm, but IMO you will end up paying too many fees when you set it up with the bank as a middle man.

Check out ING Direct, TD Ameritrade & Vanguard online for more information.


Edited by Veritas (05/19/08 12:29 PM)


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InvisiblePsychoChipmunk
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Re: Choosing a Roth IRA [Re: gluke bastid]
    #8429299 - 05/21/08 03:35 PM (15 years, 8 months ago)

Have you considered using something other than a standard bank for your Roth IRA? Something to consider is that some institutions may charge you "maintenance" fees just for the privilege of having an account with them (separate from any management fees a given mutual fund may charge you.) These may not seem like much, but they eat into your earnings. They vary between institutions so shop around. You shouldn't have to pay the bank to hold your money for you, if anything, they ought to pay you!

Fidelity and Vanguard are two fee free financial houses you might look into for your needs. They have trading fees if you buy or sell, but don't charge you anything just to do business through them. I don't have any experience with Vanguard, but I have a 401k at Fidelity through my work. The online interface they have to manage your accounts is fairly easy to use.

I also have a traditional IRA a Roth IRA and a brokerage account with Charles Schwab, which also charges no fees just for having accounts with them. The online interface for Schwab is pretty user friendly, with plenty of research on stocks and mutual funds. You can handle all your buying and selling online. You can also link your retirement accounts to your checking accounts, and transfer money in directly from your "everyday" bank. If memory serves, their trading fee is ~$10-15 per transaction, regardless of how many (or few) shares you're buying, so it pays to buy in bulk. Schwab also has a roster of its own no load mutual funds that are worth looking into.


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Edited by PsychoChipmunk (05/21/08 03:42 PM)


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