ROTH IRA question?

Question

I've had a Roth IRA for about 10.5 months with Wachovia. i put 2k in it to start out. The interest rate is only 1.25%. Is there something wrong with this? Or does the rate increase over time? Because that rate is terrible and i have made 12 dollars since i started it.

Answer 1

Wachovia has put your funds in the lowest possible yielding investment. And, that's bad. Retirement funds are long term investments that should be invested accordingly mainly in equity mutual funds and some bond funds.

First, check what it would cost you to get out of Wachovia and move your funds at Vanguard for instance. A transfer of Roth IRA funds from one fiduciary institution to another may not cost you anything. It certainly does not trigger any tax liabilities or penalties because you are not taking any distribution out.

If you find out the costs are minimal, I would do exactly that, transfer this Roth IRA at Vanguard. They have the best choice of mutual funds associated with the lowest operating costs.

If the costs of leaving Wachovia, find out if these costs evaporate once you have been there for over a year. They probably should. And, at that time leave.

If costs and burden of leaving Wachovia are impossible to circumvent, talk to them and indicate you want to switch your investment earning only 1% to a diversified stock mutual fund or even a stock index fund (maybe a $&P 500 or Wilshire 5000 stock index fund). These would be a lot more appropriate retirement investment than the current investment you hold.

Hope this answer was helpful. You are welcome to contact me through "Answer" for any clarification.

Answer 2

Yes, there is something wrong with this investment. Most money market accounts and short-term IRA CDs are paying around 5%. Talk with Wachovia about switching this investment to something better. If they can't give you a better rate, pay the penalty and find a better bank.

Answer 3

Please roll over your roth ira to a mutual fund company like charles schwab. You can trade on line for free with over 5000 mutual funds. I made 12.5% last year just doing trades on my own. The key to success is buying one and then later selling it when it is up. That is how you make money. Keep buying low and selling high.

Answer 4

its probably in a money market account. they don't offer mutual funds that you can put the money into through them? (citibank does, if your interested). a mutual fund has a much higher interest than 1.25%. if not, sometimes they won't charge you for moving it into another investment company, find out and move it. vanguard is a good one.

Answer 5

I dunno, but 12 dollars in a year doesnt really seem like much for a roth IRA, are you putting money in it each month, too?