Enough planning. It’s time for action. 2 months left to open and fund your 2013 Roth IRA. For the past 4 month I have been introducing you to the Roth IRA (See here, here, here and here). Today we will cover opening and funding the account.
The Roth IRA is a type of account you can open with a financial company. Please remember that I cannot offer investment advice, just knowledge of these types of accounts. I know of three options for your account.
1. Bank account – banks offer Roth IRA accounts for their savings accounts and CDs. This is not a good option for your Roth IRA as the point of the account is to grow your money. CDs and savings accounts are great tools for your emergency fund or saving up for your vacation. For your Roth IRA we want to the money to grow faster than inflation.
2. Mutual Fund Account – A mutual fund pools money from investors and invests the money in stocks and/or bonds. It is a great way to own a little bit of many stocks. There will be a minimum amount that you have to invest when you open the account. Usually the amount is lower for IRAs, so read carefully before you open the account. The drawback to this account is that you are “locked” into one mutual fund company. If you want to buy a different company’s mutual fund then you have to open a new account and transfer the funds.
3. Brokerage Account – A Roth IRA at a brokerage firm allows for the maximum flexibility. With this account you can buy stocks, bonds, almost any mutual fund and Exchange Traded Funds (ETFs). When you buy or sell any investment the broker will charge a commission.
Do it yourself or use a professional? If this is your first time investing and these terms seem scary, by all means reach out to a professional investment advisor. This could be a local person affiliated with a brokerage firm, or an independent advisor who can help you invest in mutual funds. They will charge you higher fees then if you do it yourself. For this reason many money experts will advise against using a professional since you can do it yourself cheaper.
But, isn’t that true of everything? It would be cheaper for me to change my own oil and fix my leaky radiator on my car. However, I am not an expert and I have no desire to become proficient in fixing my car. I am happy to pay my wonderful trustworthy local mechanic for taking care of my car. If you want the same type of service from an investment professional, then you would expect them to be compensated.
For me – I love investing (I started when I was 16) and could not wait to invest my retirement money when I left the big bank. However, I spend many hours and lots of energy working on it.
Do your research and find the best fit for you. If you have questions, let me know as I can give you the knowledge you need to talk to an investment professional. (And for my Chicago-area readers, I can refer you to some great trustworthy folks.) Many have account minimums, so you may have to do-it yourself for a couple of years before they will manage your money.
OK, now you know where to open and fund your account. You have two more months to make a decision and implement. If you have been following this series, please do not stop now. I would be happy to coach you through your decision. Email me (Joel@coachyourmoney.com) leave a comment below, or, if you are in the Chicago area, stop by one of my events. I have 5 times I am speaking between now and April 15th. Check out the times and locations on my Join Me page.