Roth IRA

[benji86]

Hi,
I was thinking about opening a Roth IRA and depositing $100 every month for next twenty or thirty years or so (I'm 19). I was wondering if this is a better idea than a traditional IRA. I'm 19, my paycheck is just under $800 a month, but my expenses are low (tuition is paid for by scholarships, housing paid by scholarships and grants, recently took myself off car insurance and gave my mother my car so no expenses there, i really just buy food every month and pay for utiilities). Anyways... I'm thusly in a lower income bracket and believe I will continue in a lower income bracket (I hope to teach high school english).
Is a Roth IRA best for me?
How do I go about opening one, and where is best?

 

[laurence]

There are many on this board (including myself) that sees our current tax rate as the lowest it will be for a long time. Since you are not in a high tax bracket in a time of low taxes overall, I would say you are an ideal candidate for a Roth IRA.

 

[wildcat]

Yes, Roth.

Fav among the board - www.vanguard.com

Just order the Roth IRA kit and fill out the forms

 

[benji86]

Woot! Thanks guys!

 

[pagar]

Recommend www.scottrade.com Much easier to work with, lower account
minimums, lower fees etc. All my grandchildren's accounts are with them, there are
company offices in various locations, where you can get answers when you need them. All the paperwork you need to get started is on their site.

 

[wildcat]

Much easier to work with, lower account
minimums, lower fees etc. All my grandchildren's accounts are with them, there are
company offices in various locations, where you can get answers when you need them. All the paperwork you need to get started is on their site.

Well, I don't think that is 100% accurate. Lower fees on IRAs? You are gonna pay Vanguard exp ratios/fees and have to meet the min investment regardless of where you open it up. Lower fees on buying other funds outside of the Vanguard family for example is true. Or if you want to buy stocks within a retirement account is true. Fewer Vanguard funds available via Scottrade. Scottrade is good don't get me wrong but everything in terms of service or needs is subjective. I for one don't need a branch location. Service has been pretty good with Vanguard in my case. Just all up to what you prefer I guess.

 

[yAyA]

Recommend          www.scottrade.com         Much easier to work with, lower account
minimums, lower fees etc.    All my grandchildren's accounts are with them, there are
company offices in various locations, where you can get answers when you need them.  All the paperwork you need to get started is on their site.

Okay, I feel silly asking this question but er...I will. I was trying to sign up for a Roth account with Scottrade and had to leave. So, I saved my application and printed out the info. I need to go back to it. The only problem is that there is no place on the site to log on to find my application. I was planning on feeling dumb and calling a branch tomorrow and pray they don't take up too much of my time cause I won't have much tomorrow. Do you know wher on their site I can go to log in to find my half complete IRA form?

 

[pagar]

Well, I don't think that is 100% accurate. Lower fees on IRAs? You are gonna pay Vanguard exp ratios/fees and have to meet the min investment regardless of where you open it up. Lower fees on buying other funds outside of the Vanguard family for example is true. Or if you want to buy stocks within a retirement account is true. Fewer Vanguard funds available via Scottrade. Scottrade is good don't get me wrong but everything in terms of service or needs is subjective. I for one don't need a branch location. Service has been pretty good with Vanguard in my case. Just all up to what you prefer I guess.

Scottrade info reads: No inactive account fees or Account Maintaninence fees
Vanguard info read: Low Balance fee $10; IRA custodial Fee $10

Scottrade info reads $500 to open an account.
Vanguard info reads: $1000 minimum.
For a person who had only a small amount to invest, I would think knowing that you can invest with a lower mimumun to get started and not have to pay any of these fees would be important

Scotttrade: personal broker in a local office who will tell you their name and what experience level they have. I would think this would be a absolute requirement
for someone just getting started in savings and IRA's.

I don't have a clue how to find a half completed form. But once you have the phone number for the branch nearest you, I suspect the phone will be answered
quickly by someone who can help you.

 

[soupcxan]

Scottrade sucks. $17 to trade a mutual fund? Fees like that will be the death of a low-balance Roth IRA. Their selection of no-transaction-fee funds is limited and does not include Vanguard. And their bait-and-switch for mutual fund investors in early 2005 has still left a bad taste in my mouth (transferred all my accounts elsewhere).

Go straight to Vanguard, even if it means saving up your cash until you have the minimum...you will be glad you did in the long run.

 

[Martha]

Wherever you decide to set up the Roth--Vanguard, Scottrade, or whoever, the real important thing is to do it and at least pay attention to fees and expenses.

 

[SLC Tortfeasor]

I just set up my Vanguard account to automatically deduct $83/week from my checking account and put it into my Roth IRA!  I love the fact that it will all happen automatically. 

Why doesn't everyone do this? 

Why didn't I do this sooner?

As you can tell, I'm pretty excited.  Who knew that automated investing could be so much fun?

 

[JPatrick]

Got to agree that for mutual funds the average person is far better off using the services of the parent company.  That is to say, Vanguard or Fidelity or others.
I have been with scottrade for 7 or 8 years doing day trading and options  relating stuff, but I wouldn't think of using them as middlemen in fund transactions.
BTW, I am currently looking for a better broker so I'm not recommending scottrade for anything period. 

 

[brewer12345]

Got to agree that for mutual funds the average person is far better off using the services of the parent company.  That is to say, Vanguard or Fidelity or others.
I have been with scottrade for 7 or 8 years doing day trading and options  relating stuff, but I wouldn't think of using them as middlemen in fund transactions.
BTW, I am currently looking for a better broker so I'm not recommending scottrade for anything period. 

If you are mostly trading stocks, ETFs and options, I have been happy with Schwab. Not so good with mutual funds, though.

 

[JPatrick]

Oh yeah Benji.
I got off track and overlooked your real question.
Do the Roth for sure.  At 19 you will be light years ahead of everyone else. Also, be sure to scrub behind your ears young man 
I'd also look at Fidelity which is my favorite of the fund companies.  Why? Greater selection by far, in many cases the minimums are lower.  Fees are quite competitive as is performance in many funds.  I admit I am perhaps the only believer (on this board) in Fidelity.
Lastly, I'd tell you not to automatically get some sleepy index fund in your Roth. Given the nontax nature, this is the perfect place for the fund that is going to go up 500% in your long lifetime. 

 

[yAyA]

I just set up my Vanguard account to automatically deduct $83/week from my checking account and put it into my Roth IRA!  I love the fact that it will all happen automatically. 

Why doesn't everyone do this? 

Why didn't I do this sooner?

As you can tell, I'm pretty excited.  Who knew that automated investing could be so much fun?

LOL

I totally understand your joy. After reading the automatic millionaire, I'm all about saving automatically. I don't even miss the money and the next thing you know, you're rich...hehehehehe.

I do have a question. How was the setup with Vanguard(easy, long, etc.). Also, is there a way to set up the roth where they take the money out before it even goes to your checking. I have my TSP set up like that I like it cause I don't even accidently get to see the $$ in my checking before it's taken out

Thanks

 

[SLC Tortfeasor]

In answer to your first question, it is EASY and FAST.  It just takes a few minutes.

And yes, in answer to your second question, you can set up direct deposit also.  You can send as much of your paycheck as you want directly to Vanguard, and give Vanguard instructions about how to invest it.  Here's their FAQ on the issue:
  https://flagship5.vanguard.com/VGApp/hnw/content/DDep/HelpFAQDirDepositContent.jsp

 

[yAyA]

Thanks SLC. I will check it out.

JP, thanks for the Fidelity tip(I know it wasn't for me) but it really helped. I was just at their site and now I question going with Scottrade. I also have to check out Vanguard now. Oh my, so many choices but that's a good thang

 

[wildcat]

Just so everything is clear and I did a little research to see if Vanguard funds could be bought @ Scottrade for a Roth & have all fees waived -

Scottrade's response is - investors will be subject to all fees & expenses listed in the fund's prospectus. So that includes exp ratios & account maint fees. Not sure about custodial fee charged on Roths but that fee is waived once the amount invested in a fund is above a certain $ amount ($5,000) or if your total Vanguard assets are > I think 50k

Make your own choices but these are da facts

 

[justin]

It seems like getting dinged with a couple of $10 custodial fees for a few years at Vanguard in exchange for access to 0.2-0.3% excellent mutual funds is a good deal. In a couple of years, your balance will be $5k, and no more custodial fees. Compare that to $17 per month for buying in to the same funds at Scottrade. Pick one of the Vanguard non-index funds if you don't want to pay the $10 index fee for balances less than $10000. Lifestrategy and target retirement set of funds at Vanguard are great for avoiding the $10 index fee, and getting superlow expense ratios.

If you're going to be a gunslinging trader in your Roth IRA, maybe go with Scottrade. Good luck giving away all your savings in commissions though!

I haven't looked at Fidelity for IRA's. They don't have as many low expense ratio index funds as Vanguard.

 

[wildcat]

I was trying to be unbiased. In reality, I prefer Vanguard and do all of my biz there. $10 custodial fee on accounts below $5000 is no biggie to me.

 

[SLC Tortfeasor]

Lifestrategy and target retirement set of funds at Vanguard are great for avoiding the $10 index fee, and getting superlow expense ratios.

I'm in one of the targeted retirement funds, and I believe it is also subject to the $10 maintenance fee for accounts under $5k.

 

[justin]

I'm in one of the targeted retirement funds, and I believe it is also subject to the $10 maintenance fee for accounts under $5k.

To clarify, Vanguard may charge two fees to IRA account holders. One is the IRA maintenance fee for accounts with balances less than $5k, the other $10 fee is ONLY for index funds with balances less than $10k. Your target retirement fund will have a fee of $10 if the balance is less than $5k. The index fund fee will not apply to your target retirement fund, since it is not an index fund. The target retirement funds are funds of funds (most or all of which are index funds, and all have low ER's). In my opinion, if you're starting with $10-20k or less in Vanguard and adding more over time, it may make the most sense to buy a Lifestrategy fund or target retirement fund. It is a cheap way to get diversification and also avoid six or seven $10 index fund fees for balances less than $10k.

 

[Sheryl]

I'd also look at Fidelity which is my favorite of the fund companies.  Why? Greater selection by far, in many cases the minimums are lower.  Fees are quite competitive as is performance in many funds.  I admit I am perhaps the only believer (on this board) in Fidelity.

Nope - I'm a Fidelity Fan too.  Have had an IRA and a  mutual fund account with them for about 15 years.  Started my individual stock account there about 2 yrs. ago.  Just moved my Roth there last month.  My reasons:

1.  Good solid funds -  FLPSX and FCNTX have been the basis of my portfolio for years. (before I could even say "my portfolio" with a straight face).

2.  Low stock trade fees.  Once you get to "Silver" level, they are $10.95 per trade.

3.  Easy to use website with all the info about all your accounts at your fingertips.

4.  Really helpful telephone customer service 24/7.

5.  They've been around a long time, aren't going to disappear or merge anytime soon, and my Dad recommends them.

 

[JPatrick]

Nope - I'm a Fidelity Fan too. 

Eggscellent Sheryl!  I could tell from your previous posts that you were very intelligent
Low Priced was one of my key holdings until last year when Joel put a couple of his trainees out on their own.  Thinking LP was getting a bit plump I went with the new FCPGX.  So far so good.  I still hold Contra, but for the past two years my largest traditional fund has been FLVCX.  Needless to say that has been sweet mainly thanks to oil.  I also work with the selects a lot.
Haven't tried the broker services yet as I've gotten addicted to Scottrade and keep hoping they will one day get it right. 
Glad there are two of us here.
So do you also drink Corona?  8)

 

[Sheryl]

Eggscellent Sheryl!  I could tell from your previous posts that you were very intelligent

It's obvious to all, isn't it?   :

So do you also drink Corona?  8)

Indeed.  At least when I'm on vacation on a sunny beach.  Right now, with the colder weather, my beverage of choice is Black Butte Porter.  mmm.

I like the looks of the FLVCX - thanks for pointing it out.   You were probably wise to move out of LP when you did - my weak spot is never knowing when to let go -  I still have a boatload of Magellan that I got in the early 90's I think.  It is not going anywhere fast now, but I can't stand to take the capital gain so I'll probably leave it there forever.   I just keep buying new stuff without selling the old.