Starting a Roth

[Adventuregirl]

Hi all! I just called Vanguard about taking a little tradional IRA that I have at a local bank and converting to a Roth with Vanguard. The reason being that after paying the taxes the account will be approx. $1000., which is the amount I need to open a Roth with Vanguard...
I was suprised to hear that there would be (2) $10.00 annual fees applied to the account. $10.00 for custodial, and $10.00 for an Index fund. The custodial gets waved at $5K and the Index fund fee at $10K.
My thought is....is it worth it to make the conversion to the Roth if I only have $1K to begin with and will be contributing $100/mnth after that? Will the $20. a year end up costing me anything I might earn on such a small amount of money?
Is it still worth opening the account or does it make more sense to wait until I am closer to the $5K to open it?

Thanks!
Adventuregirl

 

[MasterBlaster]

a Roth IRA is only worthwhile if:

1) you are going to be in a higher tax bracket when you retire than now (not generally true for retirees, however your situation may be different. Also keep in mind that nobody knows what congress will do with taxes in the future.

2) or you are covered by a pension plan and have too much income for a regular IRA

3) or you want to get that extra bit into your tax-defered accounts (the after tax bit that a Roth offers)

per the $20 fee: Well thats 2 percent of your balance (every year) - from what I can see it looks kinda expensive.

But what fees does your local bank charge. If it's in a CD account, and you are relatively young, then the biggest fee may be the loss of long term growth of an equity account over many years. If your local bank has equity funds. It may be that the fees are really high but are not easily found. I suspect that an equity fund from your local bank has expense ratio fees of at least 2 percent a year.

Also, If you do a custodial transfer of the little banks IRA to Vanguard then you can avoid the 10 percent early withdrawal penalty that the IRS imposes for people liquidating their IRA's before they turn 59.5 years old.

maybe a regular IRA with a company like Vanguard is the best option. Call up Vanguard to ask how you could transfer the little banks IRA to them. You will pay no taxes (until it's sold) or transfer fees. Ask Vanguard to suggest an equity fund for you.

 

[justin]

If you get a non-index fund, you won't have one of those $10 fees. Only a $10 custodial fee for balances less than $5000. If you're young, look at their Target Retirement funds (2045 is pretty aggressive). Their Lifestrategy funds also come in different degrees of riskiness. Lifestrategy Growth fund is good if you're young and willing to take risk. I think most funds are $1000 minimum for IRA's. The $10 custodial fee is waived if you have $50,000 total invested with Vanguard, FYI.

 

[SLC Tortfeasor]

Yep, I just started up my Roth IRA at Vanguard last week.  Did a target retirement date of 2035.  I'll be 59 years old then, hopefully having long since switched over to some relaxing part time job.

Did you see this thread?

http://early-retirement.org/forums/index.php?topic=4611.0

 

[Adventuregirl]

Thanks to all for pointing me in the right direction....SLC the thread was very helpful!
Adventuregirl