are they ANY guarantees?

[Guest alk1]

I would like to open a Roth IRA looked at a large bank's website and on its Roth page in bold it had three notices:

NOT FDIC INSURED

NOT BANK GUARANTEED

MAY LOSE VALUE

I was quite surprised. It sounds as if there are no basic guarantees or safeguards. And how could a Roth IRA lose value?

[Fredman]

These three disclaimers are common in today's banking industry.

Its sometimes assumed that since I'm buying a bank product, it must be guaranteed or insured against loss.

This is true for checking and savings accounts (up to certain limits) but not for investment/brokerage type accounts.

If you open a Roth IRA at a mutual fund company, they won't guarantee it - same thing with banks. Their disclaimer might not be as bold or to the point, but then again nobody has ever expected a guarantee from them.

Good Luck.

[John Olsen]

A ROTH IRA is not an investment. It is a way to OWN an investment. You can "fund" your ROTH IRA with a CD. In which case, you get all the guarantees (and all the limitations) of a CD. Or you could fund that Roth IRA with a single stock or an stock mutual fund. In which case, you get NO guarantee of Principal OR of a minimum return, but the potential for higher growth (than a CD).

Again, a Roth IRA is a program - a way of holding property, with its own rules as to allowable contributions and distributions, and tax treatment. Factors such as Guarantee of Principal, Rate of Return, etc. are functions, NOT of HOW the investment is owned (Roth IRA vs., say, a "regular" investment account, with no tax qualifications), but of WHAT TYPE OF INVESTMENT the money is in.

Hope that helps.

------------------

John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

[John G]

It sounds like you are new to the world of investment. Generally, the annual return of investments correlates to the level of risk you accept.

The web site at the bank probably included mutual fund or bond investments which are not insured and can increase or decrease in value. The closest thing to a guarenteed investment would be bank certificates of deposit (insured by FDIC) or government bonds (you are OK as long as the USA is OK). These investments are very very low risk, but not zero risk.

The problem with these "safe" investments is that they do not provide a very good return. Over the long haul, they may only slightly outperform the long term rate of inflation.

If you are looking for a higher return (say 8% to 12% per year) then you have a range of choices: Ginnie Maes, corporate paper, bonds and stocks to name a few. While the good years generally outnumber the bad years, in any one year you can get a significant swing in value. But time is your friend: over 20+ years you expect to do well. You still have to be able to stomach the swings and not loose sleep.

It sounds like you need to educate yourself about long term investing. You can be self taught (reading Money, Kiplinger, Wall St Journal) or you might want to sign up for some classes at community college. The retirement assets of successful people can grow in their lifetime to astonishing size, a million or more is not all that unusual. It makes sense to get the training to make good decisions.

One last word, don't do anything if you don't understand the choice. There are lots of folks eager to sell you things like annuities and high cost mutual funds that may not be in your interest. Good luck.