Expert: Steve Hach - 6/1/2009

Question
I want to open a Roth IRA to save for retirement.  I want to know: 1) Where should I open the Roth IRA account?  I don't have $ to go to a financial planner and I only have a small amount of money to get it started (about $100).  I called Wells Fargo bank and they only had an interest rate of 1.1%.    Is that all I can expect?

Answer
Hi Nikki,

Thanks for the question

You can open a ROTH IRA just about anywhere that has an investment arm or that keeps accounts.

If you want to avoid a fee or financial planner, I recommend setting up your account with one of the online banks/brokerage places.  You can generally designate an account as the IRA and garner the advantages with low overhead that way--ING, TD Ameritrade, etc.

However, please be advised that right now you are NOT going to garner much income from a simple money market or other savings account--and yes it may be just 1% or so.

Currently the Federal Reserve has interest rates at 0-.25%.  Home Mortgages are running @5%.  No bank or financial institution is paying much more than 1-2% for a risk-free savings account.

Higher returns can be garnered via investments in stocks/bonds, gold, commodities, etc., and these sorts of things can be bought with an online brokerage IRA account, but they carry far more risk and you could lose all your money.

The important thing is to save money all the time, as much as you can and to avoid debt.  Credit cards, adjustable rate mortgages, etc. are a bad idea.  The more money you can save and the sooner you can begin means that over time you can accrue a lot of cash for retirement no matter how you have it invested--within reason of course.

One other though, remember that once you put the cash in the IRA you are not able to take it out without paying substantial penalties and taxes with very few exceptions.

Best,

Steve