Where do I go to get a Roth IRA? A bank?

[Guest Kayann Kretschmar]

Where do I go to get a Roth IRA? A bank?

I am very new at this - sorry for my ignorance. I would like to get one that doesnt cost me anything? Basically, when I get a little saved, I want to get it invested easily.

I have atraditional IRA at a bank which came from a 401K rollover a few years ago - I think it is a CD type? I have to re-do it every few years.

Thank you so much for nay assistance!

[John G]

Edited from prior posts:

You need to think about two things on the front end: who is my custodian, and what type of investments am I likely to make. Custodians can include banks, brokerages, mutual fund families, etc. Many of the brokerages such as Schwab and Etrade give a chance to buy stocks, bonds and mutual funds. You can move a Roth account, so initial choices do not bind you forever.

Lots of folks have no problem dealing with out of town firms, especially now that they almost all have outstanding web sites. Banks used to have fairly conservative choices but are starting to offer more options. Banks are ussually local and you may value face-to-face service. But don't expect to call a bank employee using an 800 number at 11pm, and many have poor internet options. You may want to read the March issue of Consumer Reports or subscribe to Kiplinger Personal Finance mag. Both a good sources for beginners.

Ask about fees. There are many firms that do not charge any annual fees for IRA accounts. Others charge $10-20 per fund or per account. Some eliminate the charges if you just ask, or when your assets grow. The brokerage commission fees for trades range from ultra low to high. Same with the imbedded expense rates for mutual funds. Since there are perhaps 8,000 stocks and another 8,000 mutual funds it is impossible to generalize. The nice thing about Consumer Reports is that the boil down the mutual fund choices to a hundred or so good ones and explain things in laymen terms.

My suggestion for beginners: invest in a growing future by putting your IRA funds into a general stock mutual fund and a very good version of these is a broad based index fund like on that mirrors the S&P500. Why? Easy to track, easy recordkeeping, market performance, diversification and low cost/expense. After 4-5 years of contributing and letting this account grow you may want to split your assets between a couple of funds. Later still, when you pass the 100k mark you may feel comfortable with owning 8 to 12 individual stocks.

Equities (aka stocks) are an investment in growth. Sure, stock markets go up and down. But good years out number bad years by anywhere from 5:1 to 8:1 and over many decades equity investments will do a better job (much better than CDs) of growing above the general rate of inflation.

You don't need to chose the same bank for this years contribution that has your rollover. At some point you may want to roll you bank IRA into another vehicle if the bank does not offer reasonable investment options.

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