Apr 12

Question by Why?: Where is the best place to open a ROTH IRA?
I’m 26.. I have $ 19000 in savings, $ 5000 in 401K and no credit card debt. I have a car loan $ 15000 which I intend to keep open just to keep a good credit history.

My problem is, I’m not really good with investing and I know very little with the investing lingo. Is Roth IRA the right way to go? If so, which brokerage company should I open it with? Also, any other tips regarding retirement planning.

Best answer:

Answer by The Son of Rage and Love
As long as you understand that you cannot take out the money until age 59-1/2 without huge penalties then a Roth is a good choice. My favorite mutual fund company is American Century Investors. They have a wide variety of funds and great customer service. Vanguard is good as well, but their customer service isn’t that great (that is what you give up to get their lower fees).

Add your own answer in the comments!


5 comments so far...

  • Wonder Said on April 12th, 2011 at 7:03 pm:

    I like TD Ameritrade. They have a broad choice of investments. They will advise you on investments, but you’d be better off the find a certified financial planner who 1) doesn’t work on commission and 2) will suggest different types of investments and 3) has your goals in mind – not theirs.

    -MM

  • the tax lady Said on April 12th, 2011 at 7:31 pm:

    Vanguard.
    Fidelity.
    TIAA-CREF.
    TR Price.
    Merrill Lynch.
    Morgan Stanley.
    Charles Schwab.
    eTrade.
    Ameritrade.

    All will accomplish what you want.

    Keeping a car loan just to build credit isn’t worth it.

    A ROTH IRA is a good idea since after 5 years, you can take your contributions back in an emergency without paying taxes or penalties. (Unlike the 401k)

  • Judy Said on April 12th, 2011 at 8:25 pm:

    A car loan can be paid off after 1 year.
    The benefit to your score will not improve after that time.

    Do not consider going to a bank for a ROTH – the fees are mind boggling.
    Two companies I like:
    Charles Schwab and Fidelity Investments.
    No cost to open up a ROTH.

    The beauty of a ROTH –
    after 5 years – you can take the money out penalty free.
    Before those 5 years – if you want to buy your first home – you can take a the money out penalty free (ask first – you’ll need a tax form).
    /

  • Bogey Mann Said on April 12th, 2011 at 8:53 pm:

    Congratulations for saving $ 19,000 at your young age. You’ve received some interesting answers to your very good question, and some misinformation, too. So, here goes:

    I like the ROTH IRA for you. Although you may give up some tax benefits now, you could enjoy tax-free income for generations; to you, your spouse, and your kids, one day, when they inherit your balance. You currently enjoy tax-favored investing in your 401k.

    You may remove your contributions from your Roth IRA anytime. The ordering rule for Roth IRA withdrawals is contributions first, then earnings, if any. Generally speaking, earnings can be withdrawn tax- and penalty-free, as well, after five years and your age 59 1/2, unless an exception applies. RMDs (required minimum distributions) at age 70 1/2 do not apply, and you may continue to contribute to your Roth IRA beyond age 70 1/2, providing you have earned income.

    Where? My first suggestion is to find a Certified Financial Planner (CFP®) professional you can trust. Or, you could try and do-it-yourself with the many fund families and discount brokerage firms out there. But remember this: the single factor that contributes most to poor investOR performance (notice I didn’t say investMENT performance) is not poor security selection, high fees, or market timing; it’s strategy/investment hopping. It’s been revealed, study after study, that investors are terrible at managing their own money. They BUY near market highs, due to greed, and SELL near market lows, due to fear. That said, find a “LifeStages” or “LifeCycle” type fund to invest in, and get on with the other important things in your life. These types of funds are well diversified, and get more conservative, automatically, as you get closer to retirement.

    Hope that helps.

    DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and is not intended to provide specific advice or recommendations for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

  • Ana Nevada Said on April 12th, 2011 at 9:51 pm:

    Planning your retirement is one of the most important decisions that you will ever make concerning your financial future. the important benefit of a Roth IRA is that unlike Social Security benefits, IRA money can be passed down to heirs. Some people says Vanguard or Fidelity have the best expense ratios. But look at the companies that have loads and it all depends on what you invest inside the Roth that will determine your return.

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