College> Finance> Investing for the Future: Roth IRAs 2

Roth IRA Tips for students - where, when and how to open and maintain a Roth IRA.  

by Jan Michael

Where should I put my money? 

After deciding to open a Roth IRA, you are faced with many choices about what kind investment vehicle you should use.  The options range from low risk, but potentially lower yield certificates of deposits at banks or credit unions to Roth accounts at investment firms.   

Roth IRA Account Selection Tips and Considerations 

While your investment vehicle is a personal choice that depends upon your risk tolerance, there are several points that need to be considered for all types of accounts.   

• What is the institution’s minimum balance required to open and maintain a Roth IRA account? 
• Can you add to the Roth IRA balance over time, if so what are minimum transactions?  This can save you money in account fees. Many firms require at least $250 to open an account.  Some firms will open an account with less money if you commit to sending monthly investments into your account. 
• What are the account maintenance and transaction fees? Please investigate potential fees thoroughly. The fees vary at each institution, so don’t assume all accounts have the same fee structure. Some fees are hidden or unexpected, we recently experienced a $25 account-closing fee at bank when we moved to consolidate our IRA’s. If you use an investment firm, there can be annual IRA account fees (For example one firm charges $10/IRA account/year) and transaction fees.  Fees can have huge impact on your investment, so be sure to select an account with low fees.  
• What is your risk tolerance? If you are going to be worried and lose sleep over what happened to money in your Roth IRA stock or mutual fund account, you’re better off with a lower risk, fixed rate investment. 
• How much time can I commit to researching and watching my Roth IRA investment?  Be sure to select an investment vehicle that fits your attention span and time budget.  Most students will want to set-up an account that does not require frequent attention.  
• What is your time horizon? Hopefully you plan to leave these funds untouched for the long term.  If you find a good fixed rate of return, consider locking it in for a couple years.  
• Plan on reviewing your account at least twice a year, of course quarterly is even better.  
• Be sure to keep good records about your investments, so you can track the results and notify the company when you move.  Consider building your account over time at one institution so that record keeping is easier.  
• All IRA accounts must be set-up and funded by April 15, of the following year.  So you have until April 15, 2007 to fund your 2006 IRA.  Maximum investment $4000.  You’ll need your social security number and some cash to set-up a Roth IRA.  
• Check into setting up a regular/auto Roth IRA investments so that you aren’t trying to fund the account at the last minute.

Build your fortune with a regular Roth IRA savings plan and watch your money grow tax-free.  

Consult your tax advisor regarding your unique situation prior to investing. 

Previous article: College and High School Students  
Open a Roth IRA today & start building your fortune tax-free

-Back to top-