Small initial investments in Roth IRA's

[Tykimeister]

Hello,

I am looking into starting a roth IRA. The thing is, I'm a student and don't have the $2,000, $5,000, or $10,000 initial investment to start one at vanguard, fidelity, etc... I want to take my next pay check ($600) and put it into a Roth, then add as much as I can throughout the year. Then when I get a better job after graduating I will make the maximum contributions.

I know I can start a Roth at my local bank (wellsfargo) but I would rather start one at a place like vanguard, fidelity, etc, so I can have my Roth IRA and future mutual funds all on the same account. I don't want to keep track of 3 or 4 different investments in the future from 3 or 4 different companies.

So, with a small initial investment into a Roth IRA ($600) how can I start a Roth IRA at a place like vanguard or fidelity? Can I start one at wellsfargo with a small initial investment then "roll over" the IRA into a vanguard account once I meet the $5,000 minimum initial investment? Any advice on this subject would be greatly appreciated.
Thanks,
Ty

 

[Gotadimple]

Ty,
Welcome. As you say, the big mutual fund companies have a minimum that you can't afford yet. But you've found a place to start an account.

You asked if you could roll over your account once you've hit the minimum, and the answer is yes. Most of the bigger fund companies like Fidelity or Vanguard are happy to help you with that, when the time comes.

-- Rita

 

[Tykimeister]

So if I want to start a Roth IRA now, I should simply just walk over to my bank (yes, its right across the street from my appartment) and start a Roth IRA there? Will the interest rates be similar between wells fargo and vanguard, fidelity, etc?

Also, how do they set up the Roth? Will there me a time period that it has to stay in the account before you can re-invest the money again? Like you get a higher interest rate the longer you let them keep your money in their IRA? How would this time period work if you wanted to roll over the IRA to vanguard?

Thanks for the reply,
Ty

 

[Sarah in SC]

You can open up a Roth account at Schwab with a zero balance.
Deposit the cash and then build up to the minimum amount for the funds you want to buy. Lots of funds have lower minimums than $5k. What you don't want is to open it somewhere they charge you a yearly maintenance fee, so be careful.
It is okay to have cash in your Roth between mutual fund purchases. everyone's gotta start somewhere.

 

[Gotadimple]

So if I want to start a Roth IRA now, I should simply just walk over to my bank (yes, its right across the street from my appartment) and start a Roth IRA there? Will the interest rates be similar between wells fargo and vanguard, fidelity, etc?

Also, how do they set up the Roth? Will there me a time period that it has to stay in the account before you can re-invest the money again? Like you get a higher interest rate the longer you let them keep your money in their IRA? How would this time period work if you wanted to roll over the IRA to vanguard?

Thanks for the reply,
Ty

Ty,
Call any of the 1-800 numbers and customer service will be happy to answer your questions. In a nutshell: you start your account by depositing funds into a money market account. You can see the rates for the broker's money market on their web site. Money markets are not like CD's, but more like a regular savings account. You deposit the money and you can move it any time you are ready.

When you have saved enough to meet the minimum initial deposit for a mutual fund, then you can move money from your money market account to the mutual fund. I'd encourage you just to surf the websites, or call the Customer Service departments -- they are all very helpful.

-- Rita

 

[FUEGO]

The Vanguard STAR fund has a $1000 minimum for Roth IRA accounts. Maybe get your $1000 together and then put it in the STAR fund. Once you have $3000, you can sell STAR and move to almost any other fund at Vanguard.

I wanted to put my two kids' Christmas and birthday money into something at Vanguard, so I chose the STAR fund and started it with $1000. It's a little less aggressive than what I would think a 2 and 3 year old should be, but hey, it's a start! Way better than getting 2% on their money at the credit union. It should be a good start for your IRA too.

 

[jIMOh]

Hello,

I am looking into starting a roth IRA. The thing is, I'm a student and don't have the $2,000, $5,000, or $10,000 initial investment to start one at vanguard, fidelity, etc... I want to take my next pay check ($600) and put it into a Roth, then add as much as I can throughout the year. Then when I get a better job after graduating I will make the maximum contributions.

I know I can start a Roth at my local bank (wellsfargo) but I would rather start one at a place like vanguard, fidelity, etc, so I can have my Roth IRA and future mutual funds all on the same account. I don't want to keep track of 3 or 4 different investments in the future from 3 or 4 different companies.

So, with a small initial investment into a Roth IRA ($600) how can I start a Roth IRA at a place like vanguard or fidelity? Can I start one at wellsfargo with a small initial investment then "roll over" the IRA into a vanguard account once I meet the $5,000 minimum initial investment? Any advice on this subject would be greatly appreciated.
Thanks,
Ty

T Rowe Price.

They will waive fund minimums if you commit to invest regularly (once a month) with at least $50.

T Rowe ERs are lower than Fidelity's on most of their managed funds.
I have most of my retirement assets (150k) at T Rowe in rollover and roth accounts.

 

[Nords]

T Rowe Price.
They will waive fund minimums if you commit to invest regularly (once a month) with at least $50.

We did this with both our 15-year-old's Roth IRA and her taxable account at TRP.

When your TRP account meets the minimum of whatever fund company you wish to use, then you contact them to fill out the roll-over paperwork. They do all the correspondence and the money never touches your hands. When your rolled-over funds are at your new custodian, you can cash them into whatever mutual funds/ETFs/equities/bonds you prefer with no tax impact.

It's ironic that we ended up at TRP. 30 years ago it was the only mutual-fund company that would waive minima and accept monthly deposits from my spouse, who was then 16 years old...

 

[Tykimeister]

If I wanted to invest now, starting with $600 and probably $1,000 a year for the next 2 years, what would be my 5 top choices in long term investments? Considering im only 22 years old, I would like to find some reading material on such subjects.
Thanks,
Ty

 

[Darryl]

Tykimeister, at the amounts you're talking about the fund you pick is not that important. The important part is you have started and you have done it at an early age. Good job! So go to VG and buy Star with $1,000 and add to it as you go or go to TRP or Schwab with less and agree to monthly amounts which you can later move wherever you want after you have developed your plan and grown your portfolio.
Books:
Dave Ramsey's Total Money Makeover - building a budget, eliminating debt, buying the right insurance, improving your cash flow, good benchmarks for what to spend on car's, homes etc. Investment idea's maybe not so good
Bogleheads guide to investing - also an easy read and good advice on low cost index investing, asset allocation etc.
Four Pillar's of Investing - forgive the oversimplification asset allocation and costs matter.
These three will point you in the right direction but there are many more good books out there. Your money or your life was a good read. the millionaire next door, the richest man in babylon, a random walk down wall street and we have a healthy list of recommended reading.

 

[Nords]

If I wanted to invest now, starting with $600 and probably $1,000 a year for the next 2 years, what would be my 5 top choices in long term investments? Considering im only 22 years old, I would like to find some reading material on such subjects.
Thanks,
Ty

The first step should be deciding on an asset allocation, followed by actually choosing the funds.

Here's a Cliff Notes version:
http://www.bankrate.com/dls/news/fi...ment_investing/asset_allocation_charts_a1.asp