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What type of IRA should I open and where should I open it?

I have been horrible at saving for retirement and want to change this but really don't know where to start. I'd like to open an IRA but 1. I'm not sure which type to open and 2. Im not sure where to open this type of account (my bank only offers CDs).

Googling got me way too many confusing results (the only thing with money I'm good at is spending it). Suggestions on where to start looking or an institution to talk to about this is really what I'm looking for.

Little Red Ryan Hood asked in Personal Finance about 1 year ago | Report

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4 Answers

  • Profilepic_small
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    I'm a big fan of Vanguard (https://personal.vanguard.com/us/home). They have an excellent history of above-average returns and user-friendly accounts. My retirement through my employer is a Vanguard SEP-IRA, and I also use them to invest in index funds.

    They have a lot of options for those who are less well versed, like their Target retirement funds (you pick the year you aim to retire, and the funds will automatically adjust over the years to become less risky the closer you get to that target year). They also make automating your savings really easy. I have it set up to automaticaly transfer a certain amount from each paycheck into my Vanguard accounts, so the money is gone before I can spend it!

    Lara answered in Personal Finance about 1 year ago | Report
    2 comments by Kip Waddle and Minchen…
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  • Sakuraconbadgeimage_small
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    If you are under 50 then a Roth is, without a doubt, a better choice for you.

    1. If your employer offers a 401(k) with a match, contribute at least enough to maximize the match. If possible, make the contribution to a Roth 401(k). If your employer's 401(k) doesn't have a Roth option, then ask for it.

    2. Your next dollar should go into a Roth IRA unless your income precludes opening a Roth.

    3. If you have any more money to save left after steps 1 and 2, then invest it in a regular investment account.

    Where to invest? That depends on how much you want to do it yourself and how much help you want. The discount brokerages and no-load fund families are cheap, but they don't give much support. You may not need a lot of support if you choose asset allocation funds.

    I'd stay away from Target Date funds as they don't mean what you think they mean and they are the hot dog of the investment industry - filled with stuff you wouldn't buy separately.

    Charlie Mas answered in Personal Finance about 1 year ago | Report
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  • Sho_small
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    IRS Publication 590, http://www.irs.gov/publications/p590/, will break down traditional IRA's and Roth IRA's for you. I thought this was quite a helpful document coming from the IRS. It even has little "Fred is single with a taxable compensation of blah dollars..." examples. That might be a good place to start.

    rickibot answered in Personal Finance about 1 year ago | Report
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  • Subcultureoftwo_small
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    Sacrelicious

    I recommend BECU. The rates are good and the staff there are really, really helpful. Every year at about this time, I just call them up, tell them I want to start another IRA, contribute the maximum amount for the year ($5000), and that's it. No matter what crappy summer jobs I worked, I always tried to make sure I'd be able to contribute the maximum amount each year.

    I believe having IRAs is also good for tax purposes.

    The IRAs I have are 24 month IRA Bump CD's. The longer the time period your money is tied up, the better your interest rate. Bump means that during that 24 months, if the interest rate for the IRAs increases, I can opt to "bump" that IRA up to that from the rate it was when I originally bought it. It's a cool option, although I've never exercised it. All my IRA accounts have different interest rates because I bought them at different times, so I should probably pay closer attention.

    After they've matured, I just leave them there to marinate. I figure that money is sacrosanct and I don't touch it.

    I think you're also eligible for Roth IRAs if you're in a low enough income bracket, which are a good kind to get (I think that's what I have).

    Bottom line: Go to BECU (or wherever) and ask to speak to someone. They can explain all your options and help you figure out what type of IRA is best for you and your financial situation.

    Sacrelicious answered in Personal Finance about 1 year ago | Report
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