Can I stop making contributions to my Roth IRA?

Question

I want to open a Roth IRA with USAA (my bank) and they require that I make $50 contributions a month to my Roth IRA. Is there any IRA law that says that I MUST keep contributing once the account is open? Does anyone else have a Roth IRA with USAA?

Answer 1

Yes, we have a Roth with USAA and we stopped paying into it after about two years (decided the money would be better spent paying off our credit card debts, now all gone). The money still sits there, earning interest for us. I've transfered the money in and out of different mutual funds almost yearly. We took some out while we were waiting for our tax refund a year ago, then, when the refund came, put it back in.

Answer 2

There is no law that I am aware of that requires a minimum monthly contribution to a Roth IRA. In any case, I recommend looking brokerage firms such as the Vanguard Group or Fidelity Investments for a Roth instead of a bank. Brokerage firms charge lower fees than banks, and you can contribute/ add funds when you want to without monthly requirements, but most require $1000 or more for the initial investment when you open the account.

Answer 3

There are no requirements to make contributions to a ROTH IRA. USAA is just a big outfit and like all big outfits they don't want to mess with small potatoes like yourself unless you commit to say $50 a month. You can open an IRA (ROTH) at just about any financial institution and never put a $ in it. There may be an annual fee but that is it. It is your choice on how much you want to submit to your ROTH IRA at most institutions. Just ask questions and any willing representative should be able to assist you.

Answer 4

There is no IRA law that says that you have to pay a minimum but if the account is held at a cetain bank then you hav to meet thier requirements which was probably something like having a minimum balance of $2500-5000 or making the minimum monthly contributions right? If it's a problem to make the contributions then have your IRA at an institution that doesn't have a minimum balance or contribution. However I do recommend maxing out the IRA to the $4000 limit if at all possible.

Answer 5

As far as the IRS is concerned, there is no lower limit as to what you contribute to a Roth IRA...only an upper limit. USAA is (probably) trying to prevent people from having accounts open with very little money.

All financial institutions have a fixed cost associated with each account (mailings, etc.) that they recover by investing your money at a higher rate than what they pay to you. If your account is small, the difference in what they get for your money and what they pay to you isn't enough for them to cover the expenses. They are a business like all businesses and arn't in business to lose money. But, they don't want to chase away all their poorer customers because a lot of poor customers become rich customers eventually. So, they stipulate that you keep putting money into your account and hopefully it will be large enough where they will make a profit. If you can't commit to putting at least $50 per month into it, they don't want to deal with you.

Answer 6

Hi, as a financial planner, I always encourage my clients to NOT invest through banks. Banks typically have higher fees, sales loaded funds and worse performance than brokerages. If you plan on investing in mutual funds, I recommend looking at Vanguard. You need a minimum of $1000 to open an account with the STAR fund and you have to put in a minimum of $100 at a time though there is no annual contribution minimum. If that is too much, you can open a Roth at T. Rowe Price with as little as $50 and then follow-up contributions of $50 on a regular basis (at least quarterly I think).

Regarding the law, no, there is no law, but the rules for that bank may require it which is another reason to stay away.

Good luck and please, reconsider using your bank. It is a really bad thing to do with your money and everyone I know who has done it in the past has regretted it.

Good luck!

Answer 7

Sure, you can stop contributing to your Roth IRA whenever you wish to do so. Like most banks AND investment/mutual fund companies, however, there is a minimum account balance needed in order for them to service your account, and yours may be at risk of falling under that limit.

You would be better off opening an account with a mutual fund company where you can get an opportunity at a better rate of return. I'm sure your bank has most likely stuck you in some low interest-bearing CD...

Answer 8

No law requires you contribute to Roth IRA, it is your choice. but maximum is 4000 for 2006 by IRS rule
for example, this year you could put 1k, next year if you make more money, you could put 4k
the maximum amount is 4k for 2006,2007
2008 is 5k

Answer 9

The government has no such law but each financial instition can make its own policy. They can't make you contribute but they might do something like charge you a fee if your account is small and you are not contributing to it, because otherwise they will lose money on your account. Ask them what happens if you stop contributing.

Answer 10

No, that's not government required, that is based on the institution. They are probably doing it to protect you for tax purposes though, I would imagine. Eventually when you have to pay taxes, or take your RMDA then you'll need so much, etc. So they have obviously based things on that. I'd ask them the reasoning behind the policy, and if it doesn't seem necessary just do a roll over to another institution. Not everywhere will do that.