I recently read an article on MSN Money re how much to put away per month, year, etc based on a Roth IRA paying 10%. My current IRA is with a credit union and pays a measly 4.18%. Was the article wrong or does someone know of IRAs paying higher returns?
2006-07-13 05:10:58 · 4 answers · asked by Lisa D 1 in Business & Finance ➔ Investing
The Roth IRA is just a retirement savings plan with certain tax advantages. It doesn't pay any interest by itself. But you can choose to put your IRA savings into a mutual fund or stock that might pay anywhere from 0 to 100% return, depending upon your investment vehicle. I would suggest transfering your IRA to a mutual fund company like Vanguard or T. Rowe Price, where you can choose from a variety of attractive mutual funds. Another option is to transfer your IRA to a brokerage account (Scottrade or another), then you can choose between mutual funds, ETFs, or stocks--although you will pay transaction fees with a Brokerage account, and some companies charge an annual maintenance fee for IRAs.
2006-07-13 05:47:32 · answer #1 · answered by Yardbird 5 · 0⤊ 0⤋
The IRA (Roth or traditional) is simply an envelope into which you place investments. You contribute dollars and the buy an investment inside to the IRA (envelope). You can buy or have a broker buy the investment. What you choose to buy determines the rate of return you will earn (or hope to earn) as well as the risk. You probably have a CD in your IRA at your credit union. These are safe (ultra safe) investments. You will not lose any money with this CD investment. You could buy bonds or stocks or mutual funds or annuities with the money in your IRA.
The MSN Money article probably assumed that the IRA was invested in a mutual fund that invests in the stock market. Over the long haul (20+ years) the stock market returns 8-10% with many ups and downs.
The best advice I can give is to go talk to a licensed financial professional in your area and discuss your goals and options. Expect to pay a fee and expect to make several changes in your financial life.
Good Luck
2006-07-13 05:34:12 · answer #2 · answered by insuranceguytx 5 · 0⤊ 0⤋
Its all dependant on which type of company you have your IRA with.
Credit Unions and Banks are prohibited by law from trading stocks. As a result all they can offer their clients are CDs and money market funds. These have reletively low returns.
Brokerage firms allow you to invest the moneys within an IRA in almost any stock, bond or mutual fund. As a result you can get much higher returns.
And yes, in this type of accountd you should expect a 10% return over the long term, especially if invested ni a mutual fund(assuming the fund is well managed).
You should look into rolling your IRA over to a brokerage firm, as they give you so many more options
2006-07-13 05:29:14 · answer #3 · answered by urbanbulldogge 4 · 0⤊ 0⤋
You can use a mutual fund company and have your IRA invested in growth stock which average 12% in the past 70 years. Check out morningstar.com for some of the best rated funds
2006-07-13 05:16:48 · answer #4 · answered by Charm Brown 1 · 0⤊ 0⤋