Roth IRAs should be simple. Yet they seem super complicated. This is because no one really talks Roth IRAs at dinner parties and the internet info on them is a mess to find. So lets have a simple talk about where to open a Roth so you can just open your retirement account and be done with it!
Before I opened my Roth IRA, I spent crazy amounts of time stressing about which Roth IRA was best. Hours went into my research and I almost gave up on opening one, because answers seemed so hard to find! Why are these kind of important financial decisions so difficult to figure out?
Let’s begin at the beginning. I explained in this post and also this one why you should open up a Roth IRA as opposed to a traditional IRA, and also why you should open up a Roth IRA even if you have a 401K. Retirement accounts are always best started sooner than later, so the first step is to stop procrastinating as you figure out which one is best, and get one opened up ASAP. But which one?
This is not a good place for an IRA.
I’m going to break this down in the simplest way I think is possible. Here goes.
Basic Steps
Step 1) You are looking for a Roth IRA with THE LEAST AMOUNT OF FEES INVOLVED.
Do you want to pay excess fees on an account holding your own money? I didn’t think so.
Step 2) The Roth IRAs that can be found with the least amount of fees are at DISCOUNT BROKERAGES or NO LOAD MUTUAL FUND companies.
A discount brokerage, as opposed to a full-service brokerage, is offering services to you at a DISCOUNT. This is very good. A no load mutual fund company is a company where you won’t pay extra fees (known a SALES LOADS). Yay for discounts and no extra sales fees!
Step 2.5) Don’t open your Roth IRA at a BANK!
This is a common error! There are heavy fees involved at banks! Just because you love your Chase or BoA debit accounts does not mean these are good places to open your Roth IRA. Just don’t do it!
Step 3) Should you choose a No Load Fund or Discount Brokerage?
If you’re a beginner or less experienced with investing and Retirement Accounts, I recommend going with a No Load Fund Company. If you’re more experienced, you’ll probably like discount brokerages better.
4) Here’s simple a list of what I found in my research to be the best, most recommended DISCOUNT BROKERAGES and NO LOAD MUTUAL FUND companies, and their websites:
No Load Fund Companies
Vanguard- https://retirementplans.vanguard.com/VGApp/pe/PublicHome
T. Rowe Price- https://www3.troweprice.com/rws/public/v/home.jsp
Fidelity- https://www.fidelity.com/retirement-ira/overview
Discount Brokerages
Sharebuilder- https://www.sharebuilder.com/sharebuilder/retirement/individual-retirement.aspx
Ameritrade- https://www.tdameritrade.com/account-types/retirement.page
Step 5. Now that you have the above list, which one should you choose????
Too many options still, right??!!! I felt that way. So I’m just going to give you the answer! Wow!
Just kidding. There’s no one answer, of course, I can’t claim that…different strokes and all. But I’m still going to tell you what I think is best:
My favorite place to open an IRA for beginners is Vanguard…they are the most recommended out of all the Roth IRA companies I’ve researched. I have my Roth IRA at Vanguard. They are great. Awesome customer service and easy to use website to manage everything.
6. Okay, so now that you’ve picked a place to open a Roth IRA, which fund should you choose within the company you’ve picked?? There are sooo many…
I recommend opening up what’s called a Target Date Retirement Account. Vanguard has one. T. Rowe Price has one. They’re everywhere. This account is great because it enables you to basically pick the year you’ll retire and set up a retirement account on autopilot. These accounts are pretty diverse (which is a really good thing), so you won’t have to delve into a complicated mess of diversifying to start with. I’ll write more about these accounts later, but if you’re just starting, they’re great. Usually you need about $1000 to start one of these. (I started one at Vanguard for that much. Some of the other companies may be even less.)
7. Ok, so to recap- go open up your Roth IRA now!
You don’t need a lot of money to start. If you don’t have $1000 to start, begin putting money aside. Go for the Target Date Retirement Fund at either Vanguard or one of the other No Load Companies or Discount Brokerages- you can always change that Target Date Fund to something else later when you have more money invested and more knowledge of how retirement funds work.
8. Was this confusing?
Please ask questions! I love them, and they’ll help me too! Also, below are a list of the best articles I’ve found during my research- hopefully they’ll help you out as well!
Thanks so much, and enjoy setting up such a major achievement!
Ramit Sethi I Will Teach You To Be Rich Video (my favorite)
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