Retirement Blog

Finance Blogs » Retirement Blog » Retirement account adventures

Retirement account adventures

By Jennie L. Phipps ·
Tuesday, February 1, 2011
Posted: 5 pm ET

You'd think that setting up an IRA or other simple retirement account that doesn't have a fee would be easy, but I found out today that it's not a slam-dunk retirement planning step if you don't have much money.

I have four grown sons and only one of them has any significant retirement savings. We worry about that. My husband is an accountant and while we were helping the self-employed musician son do his taxes this year, I discovered that he actually has a small 401(k) from a previous employer. The account has less than $300 in it and is steadily losing money because the fees are siphoning it off faster than it is earning interest.

So I set out today to identify an investment option where my son could roll the money over, and maybe go back to saving a little every month. I wasn't interested in stocks, because that kind of investing requires lots of effort. I wanted something simple, like an index fund. To my surprise, finding a no-fee retirement account for that amount of savings is tough. In fact, after an hour of looking online and waiting on hold to talk to customer service reps, I didn't have any real success at all.

Here's what I did find out when I contacted the largest prospects:

  • Fidelity Investments: You can open a no-cost IRA with a $200 starting investment if you agree to deposit $200 per month after that. That sounds great, but the monthly contribution is too high for a musician with uneven income.
  • T. Rowe Price: The charge for a Roth IRA account is $10 per year until the balance rises above $5,000. Then there's no fee. There's a $1,000 minimum unless you agree to contribute at least $50 per month. Possible, but in this environment, that $10 will eat up most -- if not all -- of the profits on a small amount of savings.
  • Vanguard Group: The Roth IRA at the Vanguard Group has no annual fee, but you need $1,000 to open the account and you're limited to the STAR Fund, which is a mutual fund of mutual funds -- a pretty good choice for beginning investors. Additional contributions require a minimum of $100, unless you sign up to automatically deposit $50 per month.

As a concerned mom, I'm hoping I can persuade my son to at least take a look at these accounts and consider a regular retirement investment. There was a time when I would have just put the paperwork in front of him and signed on to make the contribution for him, but I'm trying to quit. I keep telling my self they have to learn to stand on their own financial feet.

But I'm still worrying.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
1 Comment