roth IRA

[Guest whyme]

where would one start a roth IRA without a fee,if there is such a thing.also in layman's terms explain the difference in a roth and a conventional ira. thanks

[Lori Friedman]

You might begin with a Roth IRA account at your bank. I know that my own bank doesn't charge any fees for my Roth IRA.

The IRS's own language about Roth v. Traditional IRA's is very helpful. You can access Publication 590, Individual Retirement Arrangements (IRAs) at http://www.irs.gov/publications/p590/index.html.

[John G]

Differences between a Roth and IRA

First, there are a lot of things in common. Both are retirement investment options that are owned by individuals - in their name only. Each have rules governing qualifications (based upon presence of earned income, filing status and total income). Both programs allow for beneficiary designations. Both have maximum allowed contributions. Qualification to participate is determined each year.

Roth IRA was created by legislation in around 1998. Contributions are made with "after-tax" dollars. There are no mandatory or prescribed distribution schedules. Normal distributions are tax free. Also, you can take out contributions at any time without tax or penalty.

IRAs date back another two decades. Contributions may be deductable (essentially paying in pre-tax dollars) or non-deductible, its a function of income and your elecion. There is a mandatory start date for distributions and rules governing minimum distribution amounts. Distributions (except for the non-deductible contributions) are taxed as ordinary income.

For most folks getting started, the Roth has the edge.

No Fee Options

I hate parking tickets and I hate annual fees. But, I am not sure that no fee should be the driving criteria behind selecting a custodian to handle your IRA/Roth.

Investment options, convenience, and support are likely to be more important. Are you talking CDs, money markets, mutual funds, bonds or individual stocks? Not every custodian offers each of these. Do you want a local walk up counter or will 800 number or internet/mail types of account servicing work? Do you need investment advice or are you planning to do your own research and selections?

Consider the above. There are thousands of potential custodians: mutual funds, banks, and brokerages. Many of these may fit your needs. At that point I would start asking about fees.

Ways to reduce or eliminate fees

First, ask! Many custodians want your long term business and some may waive there annual fees if you just ask. Second, consider using a custodian were you already have a business relationship as sometimes you can get fees waived because of other deposits/business. Third, ask if the custodian waives annual fees if you are on a automatic monthly deposit program. Fourth, some internet based companies waive the annual fee if you elect to get reports/confirmations by email. And... if the fee is just $10, you might consider just living with it.