Roth fees

[Guest _DEANO_]

I beleve I'm getting fee'd to death in a small Roth. My statment shows changes due to investment Results +$271.10 but later in the statment I see cash surrender value was reduced by the $90.78 surrender charge and $30.00 administrative fee. What are these fees and are they out of line? What are the going rates? I think it's time to move my money :angry:

Thanks

Deano

[Guest _DEANO_]

More information, The Roth is through State Farm and is an Variable Deferred Life Annuity. The account's surrender charges are (7% in year 1, declining 1% each year until it reaches 0% in year 8) and $30 yearly fee. The roth was started in june 2000 so at this point do I stay or go?

Thanks again

Deano

[John G]

I wonder what sales person talked you into this?

I am not a big fan on annuity products in Roths. You are mixing investments with insurance - in my experience most folks are better served by keeping them seperate. They generally offer meager returns. Insurance companies are notorious for writing policies in something other than English and tacking on various fees.

But.... you have not said how old you are, when you expect to retire, the approximate amount of money you have committed with State Farm, anything about your investment experience, or your risk tolerance. I am not 100% confident that I understand what your current insurance product provides. If you post more information I can add to the brief response below.

Annual fees for Roths: These range from zero at Etrade (using them to represent internet options where you elect email notices, or with most vendors if you assets are above $x,xxx or if you have other accounts), to nominal $10-25 a various mutual funds and discount brokerages to 30-$50 at boutique or full service brokerages. You can ask for your custodian to waive the fee - often they will. You can pay the fees by outside check to avoid reducting your Roth assets. Frankly, the recent direction has been towards lower fees because of competition and internet automation.... and then you have insurance companies and banks were "fees" are ingrained in the profit picture.

Back-end loads - In the "good ole days" all mutual funds and many insurance offerings had front end loads. When NO LOAD options starting taking away their business, some companies switched to back end loads. But as more consumers figured out they did not want to give away 5 or 7% of a million dollars, back-end loads switched to declining loads... such as you 1% declining load. After all, the sales people could say "you should be a long term investor".

There are plenty of mutual funds with front end or back end loads that have served their customers well. But, with about 1/2 of the fund industry available in NO LOAD form, why even consider a loaded option.

Deano, I without additional information, it is hard to address you "should I move" question. My guess is that your Roth may be giving you a annual return of 3-4% which is very weak. You might want to consider not putting any additional cash into this insurance product and choosing a different investment option.