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Retirement account adventures

By Jennie L. Phipps · Bankrate.com
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.

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