I have a Roth IRA. APR 5%. It's through my credit union. What can I do to get a better rate?

Question

This isn't all I have. I work 2 jobs; I have 401Ks through each one. I also have money taken out to buy company stock. But I don't want to just settle for 5% if I can do better than that.

Answer 1

There are quite a few options open to you but they are all subject to more risk than the CD.

You can transfer the IRA account to a mutual fund company such as Fidelity, T Rowe Price, Royce, and many others. If you pick wisely over the long term you should if history is any indication realize a return of about 10% annually.

You can tranfer the IRA account to an on line stock broker such as TD Ameritrade, Scottrade, Fidelity. That gives you more options but may also present you more more decisions to make. ie what to invest in. But with an on line broker you have access to ETF index funds which are unmanaged mutual funds. There are hundreds to choose from. Since they are unmanged they have very low expense ratios--some as low as 0.09% whereas the average managed mutual fund is about 1.5% although there are some at about 0.7%. Interestingly most managed funds under perform their corresponding indeces mostly due to the expenses.

Answer 2

I'd roll it over to a mutual fund company (e.g. American Century, Fidelity, T. Rowe Price, Vanguard) and put it into a small-company stock mutual fund. Over long periods of time, stocks, especially small-company stocks, have returned far more than so-called "safe" investments like CDs.

Another option would be to open a Roth IRA brokerage account at a discount broker (e.g. TD Ameritrade, Scottrade, E*Trade) and use the money to buy an exchange-traded fund. Two that I can think of that invest in small-company stocks are ticker symbols IWM and IWN.

Answer 3

The only way to get much better than 5% is with higher risk stocks & bonds as the first 2 responders mentioned. For the highest CD, saving account, money market rates in the nation, check www.bankrate.com.