Expert: Paul Henneman - 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
Nikki,
  Thank you for your question! This is actually a fairly large topic, I will do what I can to introduce you to it in the space I have here.
  First, it is important to realize that a ROTH IRA is an account, it is not an investment itself. Once the ROTH IRA is opened, it will be empty. You add your $100, and future contributions, and then have to decide what you will invest that money in.  If you do nothing, the investment will sit as cash, and not earn any return.
  You can open a ROTH IRA at any online brokerage firm. When you go through their online application to open an account, there will be an option asking what kind of account you want. Simply select "ROTH IRA" and you are off and running.
   This can all be confusing because banks and other institutions offer ROTH IRA programs, where they handle the investments for you. But they charge fees for this, and usually do not make very good decisions on how to invest your retirement funds.  
   If you do open the account online at a brokerage firm, you can select some simple investments that will need little to no monitoring. For example, there are general Bond funds out there that are very stable, with small returns, but little risk. A portion of your investments could go into a stock index mutual fund or ETF (Exchange Traded Fund) that mirror the overall stock indexes. For example, the ticker VFINX by Vanguard copies the S&P500 index, perhaps the most appropriate index for this purpose. Your investments in that fund will match the overall index (in this case a group of 500 stocks). This is much less risky than trying to pick and trade individual stocks.

I recommend that you do several things.
First, purchase a copy of "Investing for Dummies". While I realize this is not exactly a flattering title, it does give you the basics of most forms of investing, and includes a section on IRA accounts.
Then, pick an online brokerage firm to open the ROTH IRA account.  Some to check out are www.Scottrade.com (my favorite for a decent site, good service, and low cost), www.Etrade.com, www.TDAmeritrade.com, and www.FOLIOfn.com gives you a few to look at.
Once the account is open, deposit your funds, and then think about what to invest those funds in.
I would be happy to discuss more with you what to invest in, once your account is open. Please do not hesitate to follow up with me on this.

I wish you the best, a ROTH IRA account is a truly excellent way to plan for your future.

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com