Simple Roth IRA questions...

[Viper GTS]

My g/f went to open a Roth IRA at her bank yesterday. Although their financial advisor was not in, a teller told her some things that conflicted with what I know (or thought I knew) about IRA's.

First, they told her it had a fixed interest rate of ~3.4%.

Second, they told her there were no options to specify where the money was to be invested.

Third, they told her that it matured in 10 years, & then had to be rolled over to a new one. They also referred to it as a CD (which made no sense to me).

Fourth, they told her that if she opted for a 3 year maturity it would only be a ~1.9% interest.

It sounds to me like they were describing a CD & had no clue what they were talking about, but they insisted that their Roth IRA had these properties.

I wasn't there with her (she's in PA, I'm in OR), but I need to tell her if they're smoking crack or not.

Any thoughts?

http://www.fool.com/ira/opening.htm?ref=rvr

This would support my understanding of how they should work.

Viper GTS

 

[rufruf44]

It does sound like a CD. Perhaps its a IRA in CD format (instead of mutual funds, etc). My credit union offers that all the time.

 

[Viper GTS]

Originally posted by: rufruf44
It does sound like a CD. Perhaps its a IRA in CD format (instead of mutual funds, etc). My credit union offers that all the time.

Ahh, so what she really needs is something with a brokerage firm?

Viper GTS

 

[FeathersMcGraw]

Many different types of investment vehicles can be Roth IRAs. It sounds like theirs is based on CDs.

I'd strongly advise that she not invest in that one, but my personal philosophy is that people should invest aggressively while they're young.

 

[Viper GTS]

Originally posted by: FeathersMcGraw
Many different types of investment vehicles can be Roth IRAs. It sounds like theirs is based on CDs.

I'd strongly advise that she not invest in that one, but my personal philosophy is that people should invest aggressively while they're young.

That's exactly what I told her, 3.4% is a joke when you're 23.

Viper GTS

 

[djNickb]

Plus if you factor in inflation and the time value of money you will more than likely lose money by maturity at 3.4%

 

[Shockwave]

Originally posted by: djNickb
Plus if you factor in inflation and the time value of money you will more than likely lose money by maturity at 3.4%

Well, if you assume a fixed inflation rate of 3%, which I *think* is the running average right now, she'd come out ahead. By like a buck fity at maturity date.

 

[Blieb]

they were retarded.

Text

 

[dquan97]

They might be describing a CD instead of a Roth IRA

 

[EagleKeeper]

She could also check with a different bank or ask the bank for other options. Many banks will steer a novice to what is best for the bank profit.

Does her employer have a 401K?

Many of the mutual fund companies have IRA type accounts that can be opened with a small amount of capital.

 

[Viper GTS]

Originally posted by: EagleKeeper
She could also check with a different bank or ask the bank for other options. Many banks will steer a novice to what is best for the bank profit.

Does her employer have a 401K?

Many of the mutual fund companies have IRA type accounts that can be opened with a small amount of capital.

I don't think she has any 401k options, I know for sure she has none with any kind of employer matching. I figured a Roth IRA would be the next best thing for her, but obviously not through her bank.

Viper GTS

 

[Dunbar]

Banks aren't usually a good resource for investing. They will often charge hefty commissions. Why not open up an account with Vanguard? They are excellent for the buy and holders and charge almost no fees.

 

[DaveSimmons]

Originally posted by: Dunbar
Banks aren't usually a good resource for investing. They will often charge hefty commissions. Why not open up an account with Vanguard? They are excellent for the buy and holders and charge almost no fees.

Exactly what I was going to recommend. Put it in their VFINX (one of the best S&P500 index mutual funds) and let it grow for 30-40 years.

www.vanguard.com

 

[sygyzy]

I hope your gf doesn't ever go back to that bank. All misinformation.

 

[AgentEL]

I just had the same situation. I spoke to a Washington Mutual new accounts officer about opening up a Traditional IRA. He showed me the options I had. Both options were pretty low interest such as a CD.

I think he got the hint that I was too young to invest in a CD, so he strongly suggested that I speak to a WM Financial Services Financial Planner. Apparently, they are the brokerage associated with Washington Mutual. He seemed very knowledgeable and directed me to IRAs that are more aggressive (via mutual funds). Considering that I have a about 40 years till I can withdraw from my IRA, I'd say that's the way to go.