What to Look For When Opening a Roth IRA

by Patrick on October 28, 2009

Individual Retirement Accounts (IRAs) are a great way to invest for retirement because they give you the opportunity to invest your money with tax advantages that are more beneficial than investing in a non-retirement account. You can open a Roth IRA at many financial institutions, which is convenient for investors. But each financial institution is not created equally and every investor has different needs, so it pays to do your research before jumping in with both feet. You should assess your investment style and needs before opening a Roth IRA or making any other investment.

What to look for when opening an IRA

Where you can open an IRA

Many financial institutions and brokerages offer IRAs, including banks, brokerage firms (Merrill Lynch, Edward Jones, etc.), online discount brokerages (Scottrade, E*Trade, TradeKing), mutual fund companies (Vanguard, Fidelity, T. Rowe Price), and independent certified financial planners. You will want to find the financial institution that best meets your investment needs.

If you prefer speaking with someone face to face, then you may wish to go with a full service broker that has an office where you can discuss your investment needs. If you prefer a more hands on approach you may wish to go with a mutual fund company where you can invest in a variety of mutual funds and other investments, or an online brokerage where you can make inexpensive individual stock trades. If you like a combination of these features, then consider a company like Scottrade, which offers a discount online brokerage, and also has individual branches where you can meet with a broker to discuss your investment needs.

Best places to open a Roth IRA. Here are some of the more popular places to open a Roth IRA.

Questions to ask before opening your IRA

  • Is there a minimum initial investment to open an IRA?
  • Are there minimum contributions?
  • What types of fees are charged and how much are they?
  • Can fees be avoided with minimum account balances or by receiving electronic statements?
  • Does the company offer option to make automatic contributions?
  • Which investment options are available? Stocks, Bonds, Mutual funds, ETFs, CDs, other?.

You should be able to get the answers to most of these questions online, unless you are opening an account with an independent financial planner, who may or may not have this information online. If the information is not readily available online, give the financial institution a call and ask for an information packet before opening an IRA. It’s a good idea to review the fees and other details prior to opening your IRA; that way you have a good idea of what kind of fees and other expenses you can expect to pay.

All things being equal, go with the company or broker you feel most comfortable with. And if you later decide that you don’t prefer the financial institution where you opened your IRA, you can always transfer it to another financial institution. The brokers there will be happy to help you fill out the paperwork.

{ 6 comments }

Best Discount Brokerage Firms

by Patrick on October 27, 2009

The online brokerage community has grown by leaps and bounds in the last few years, which is great for investors who like to participate in online stock trading. The competition has forced innovation, cheap online stock trades, and additional features such as educational and training centers, free webinars, chat rooms and forums, social networking, free tax software to track gains and losses, and more. Not all of these features are available at each online brokerage, and some stock brokers offer better value than others. This online discount brokerage comparison chart will give you some basic information on pricing structures, and below the comparison chart are some unique features about each of these online brokerage firms. Hopefully you can use this information to find the discount online brokerage that is best for your needs.

Best online discount brokerages

Discount Brokerage Cost Per
Stock Trade		 Cost Per
Options Trade		 Reviews
Scottrade $7 $7 + $1.25 Scottrade Review
TradeKing $4.95 $4.95 + $0.65 TradeKing Review
E*Trade $7.99-$12.99 $7.99-$12.99 + $0.75 E*Trade Review
Zecco Trading $4.50
*(up to 10 free)		 $4.50 + $0.50 Zecco Trading Review
tradeMONSTER $7.50 $7.50 + $0.50 tradeMONSTER Review
OptionsHouse $2.95 $9.95 OptionsHouse Review
ShareBuilder $1-$9.95 $9.95 + $1.50 ShareBuilder Review
OptionsXpress $9.95-$14.95 $12.95-$14.95 OptionsXpress Review

Discount Brokerage Features

Each of these brokers has some features that set it apart from the others.

Scottrade: Scottrade has 25 years of experience and one of the best reputations in the brokerage industry. The $7 trades are right in the middle of the price range out of these online brokers, but Scottrade is the only discount brokerage on this list featuring brick and mortar offices where you can visit a broker for face to face meetings. No maintenance or inactivity fees, low stock trades, free online workshops, the Scottrade community, research and educational tools and tax tracking software make Scottrade a great fit for day traders and the casual investor alike. Scottrade will reimburse new customers up to $100 to transfer their holdings to Scottrade. For more information, or to open a Scottrade account, visit http://www.scottrade.com/.

Open a TradeKing account todayTradeKing: TradeKing is a personal favorite of mine. They have a slick and easy to use interface, cheap stock trades, an exceptional learning center, free webinars, free access to Maxit Tax Manager to track your gains and losses, and more. TradeKing’s pricing structure is among the best in the business for discount stock trades, including for investors who prefer to trade options. TradeKing also offers to reimburse new customers up to $150 to transfer their assets to TradeKing. For more information, or to open a TradeKing account, visit http://www.tradeking.com/.

E*Trade: E*Trade is offers a full-service brokerage firm and an online bank which makes it easy to link accounts and transfer funds to and from. E*Trade has won numerous awards for both their brokerage services and their online savings accounts. While their trades are not the cheapest of the listed brokerages, they offer a wide array of services and features not found with many other online discount brokerages. New customers can get 100 free trades when they open a new Power E*TRADE accounts and fund it with a $1,000 minimum deposit within 60 days. For more information, or to open an E*Trade account, visit https://us.etrade.com/e/t/home.

Zecco Trading: Zecco burst onto the scene a couple years ago with unlimited free stock trades. Though that business model didn’t last, you can still get up to 10 free trades per month at Zecco if you make a minimum of 25 trades per month, or maintain a minimum account balance of $25,000. Zecco also features an online community, educational services, and premium services. For more information, or to open a Zecco Trading account, visit http://www.zecco.com/.

trade-monstertradeMONSTER. tradeMONSTER is one of the newer online brokerages, but they have won several awards since their launch in 2008. One of tradeMONSTER’s more prominent features is their award winning user interface which allows the user to customize it to his specific tastes. tradeMONSTER features streaming stock prices with no additional charges or trading minimums, which is a rare feature among discount brokerage firms. The streaming information is a nice touch that removes the need to continually refresh the page for current prices, news and trends. For more information, or to open a tradeMONSTER account, visit https://www.trademonster.com/.

100 Free Trades. Visit OptionsHouse.com TodayOptionsHouse. Options House offers the lowest prices for a standard online stock trade out of the brokerages listed in this review. A standard stock trade only costs $2.95 and options trades are a flat rate of $9.95. OptionsHouse was rated #1 by Barron’s in user experience. This is a great brokerage for investors who are concerned with cost per trade.  While options traders may be able to find a lower average cost based on their trading habits, OptionsHouse scores points for their user interface, software, and other features, making them a solid option for investors of all types. OptionsHouse boasts no maintenance fees, volume requirements, monthly minimums, or additional charges for broker assisted trades. For more information or to open an account, visit: http://www.optionshouse.com/

ShareBuilder- Welcome pageShareBuilder. Buy and hold is the mantra of many investors, and that is the business model employed by ShareBuilder. Trade prices range from as low as $1 if made with an automatic purchase plan, up to $14.95 for real time trades. Most investors will fall in the middle of this price range, with all customers being eligible for automatic trades as low as $4 each without any additional fees, minimum trade requirements, or account minimums, making ShareBuilder an ideal brokerage for methodical discount trading. ShareBuilder offers an educational and training center and a variety of premium features. ShareBuilder is owned by the same company that owns ING Direct, which makes it easy to link accounts. For more information, or to open a ShareBuilder account, visit http://www.sharebuilder.com/.

optionsXpressOptionsXpress. OptionsXpress has a variable pricing schedule which drops when you makes 10 trades in a quarter. OptionsXpress has no inactivity or maintenance fees regardless of how much you have in your account, and does not charge for streaming quotes or standard withdrawals. OptiosnXpress offers free webinars, free trading tools, free advanced research and the option of a personal coaching program. You can also get up to $100 when you transfer your stock broker account to OptionsXpress. For more information, or to open an OptionsXpress account, visit http://www.optionsxpress.com/.

Which discount brokerage is the best?

As you can see by this comparison chart, there is a wide range of prices and features with these brokerages, which should cover just about anyone. I recommend reading about how to evaluate online brokers and visiting these sites to determine which online discount brokerage is the best for your needs.

{ 1 comment }

10 Steps to Declutter and Simplify Your Finances

by Patrick on October 26, 2009

Sometimes less is more. In the world of money and finances, more is usually more. But when it comes to administration and bookkeeping, less is certainly more. These tips can help you automate and streamline your finances – reducing the time needed to stay on top of things and giving you more time to do the things that are important to you.

10 Steps to Declutter and Simplify Your Finances

Handle your mail more efficiently

The average person receives 560 pieces of junk mail each year, or about 1.5 per day. A great way to minimize the clutter is to stop junk mail and opt out of pre-screened credit offers, leaving you with the more important pieces of mail to deal with. From there set up a system that works for you. Some people find it easier to do batch processing, where they go through a week’s worth of bills and correspondence at one time, and others prefer to deal with it immediately. Experiment to find which method is best for you.

Do Not Call List.

You can also opt out of annoying phone calls by signing up for the Do Not Call List. This won’t stop phone calls from companies you currently deal with or charities, but it should stop unsolicited phone calls from mortgage brokers and debt consolidation companies.

Handle e-mail more efficiently

Use your personal e-mail account for personal items and a dedicated e-mail account for finances and official household business. My wife and I set up a dedicated e-mail account through GMail for our finances, insurance, and online shopping accounts. We don’t use it for anything else, including communication with family and friends. Be sure to opt out of store e-mails and coupon offers as most of these are just clutter that you won’t read anyway. The result is a clean inbox with actionable items.

Go paperless

Opt to receive electronic statements, which has multiple benefits, including less mail to process and a lower environmental impact. Some companies will also waive fees if you go paperless, including Vanguard and Zecco Trading. If you prefer paper statements, then get an all in one printer so you can scan the document for your records. Then shred it; reducing clutter at home.

Use Automatic Bill pay

Most online savings accounts offer free bill pay as part of their service, and it has become very common through most brick and mortar banks as well. Set up as many bills on auto pay as possible, reducing the amount of mail you send and receive, and reducing the time you spend worrying about paying bills. You can also link some payments to your credit card each month so you can take advantage of rewards points or cash back. Only use this method if you are certain you can and will pay your bill in full each month.

Automate your investments

Just like paying bills, it is easier to invest when you don’t have to sit down and write a check or initiate an electronic funds transfer each month. Set your basic asset allocation and make automatic payments for your investments. This can often be done through work via 401k contributions or a payroll deduction. You can also do automatic transfers through many brokerages, investment houses, or other financial institutions. Some discount brokerages, such as ShareBuilder, offer discounts on automatic stock trades vs. real time stock trades. Be sure to go over your asset allocation every so often to maintain a balance with your investments.

Use personal finance software

Managing money is much easier when you know how much is coming and going, and where it is coming from and what you are spending it on. There are many great financial management tools including You Need a Budget, Quicken, Quicken Online, and a host of free online money management tools.

Consolidate financial accounts

It’s not uncommon for people to have several bank accounts, but most people can get by with a local bank and an online bank for better interest rates. Many people also have multiple retirement accounts because they change jobs often. Depending on your needs, it may be a good idea to consolidate these accounts. Find a bank with high interest interest rates and nice features and park your money there. If you have an old 401k plan you can roll it into an IRA. IRAs can also be transferred to one brokerage account for easier tracking. Here is a list of the best places to open an IRA.

Reduce the number of credit cards you carry

The average American carries between 4 and 6 credit cards. Access to easy credit can be convenient, but it can cause problems for some people. Reducing the number of credit cards you keep can reduce the amount of mail you receive and make it easier to manage your money. Just keep in mind that canceling a credit card can affect your credit score, so you should probably leave the oldest card open and make sure canceling any credit cards won’t make your credit utilization too high (amount of credit used vs. amount of available credit). Here are more tips about the affects of canceling a credit card.

Consolidate debt

This won’t apply to everyone, but it may be a lifesaver for some. If you are making multiple credit card and other payments each month, then you might consider reducing the number of bills you receive and need to pay each month. One way to do this is by consolidating your debt. Don’t worry, you don’t need to pay a company thousands of dollars for this because you can consolidate your debt on your own. An easy way to consolidate your credit card debt is through a 0% balance transfer, which allows you to transfer your credit card balances to a new credit card at a 0% interest rate. There is usually a fee involved to do this, but it usually maxes out around 3-5%, which is much lower than the average credit card interest rate, which hovers around 20%. This tip can simplify your bill paying and save you money.

Simplify and automate to save time and money

Simplifying and automating your finances only takes a small amount of time and effort to set up and maintain and it can save you time and money by reducing clutter and wasted energy. It’s a win-win situation.

{ 4 comments }

PF Bloggers Fantasy Football Update

by Patrick on October 25, 2009

I joined a fantasy football league with 9 other personal finance bloggers, and we are now entering week 7 of the season. So far I am in 3rd place with a 4-2 record. My team is pretty decent, but as with all fantasy sports there is an element of luck involved, and lady luck has been kind so far this season. While this is all for bragging rights and fun and games, I decided to add a little spice to the outcome and make a $100 donation to the winner’s favorite charity. If I win the league, I will let readers vote on where the donation should go. The season should finish right around the holidays, so it fits in with the spirit of giving. And it should be a lot of fun! :)

PF Bloggers fantasy footballRecommended personal finance and career articles:

This Week’s Carnivals:

{ 1 comment }

Why You Need an Emergency Fund and How to Start One

by Patrick on October 23, 2009

Unemployment. A car accident. A medical emergency. Even the best laid plans can go awry, and the last thing you want to worry about in a time of crisis is how you are going to get by financially. Life is full of unplanned events, which is why everyone needs an emergency fund.

Why you need an emergency fund

If you are living paycheck to paycheck and don’t have any cash reserves, even a minor financial emergency can set you back months – causing you to get into debt and increasing the amount you owe creditors. An emergency fund can help you avoid that situation. By planning for the unplanned, you relieve stress, reduce risk, and increase your financial flexibility.

Where to open an emergency fund

You want the money to be liquid so you can have access to it at a moment’s notice, and you also want to ensure your money retains its value. Your emergency fund isn’t designed to grow wealth, it is designed to preserve your financial flexibility and help prevent you from going into debt. So you don’t want to keep your emergency fund in stocks or mutual funds which can vary substantially according to the markets and may take several days to cash out and transfer the funds to your bank account.

The best places to keep your emergency fund are accounts that offer quick access and a stable rate of return. Some good examples include savings accounts, money market accounts, CD’s, and Checking Accounts. Be sure to find a bank that offers high interest rates because the idea is to let the money sit there until needed. You can check with your local brick and mortar bank or credit union, or use an online savings account.

Consider a CD Ladder for your emergency fund. A CD Ladder allows you to stagger your CDs so you can earn more money than a standard savings account and still have access to the money on a regular basis.

How much should be in your emergency fund?

This is an area where each expert has an opinion, and the answers vary. Some people recommend at least 3-6 months living expenses, some recommend 6 months to a year, and some recommend a few thousand dollars. In my opinion, this is a very personal decision and should be based on your individual circumstances.

If you have no debt and minimal living expenses, you can probably get away with a smaller emergency fund than someone who carries a large amount of debt and has high monthly living expenses. Another factor to consider is your income and employment status. Someone who works for the government or in a stable industry may keep less than someone who is self-employed or works in a volatile industry that often experiences layoffs or seasonal work. As a rule of thumb I would start with $1,000 at the minimum, then work up from there to a level that gives you the financial flexibility you are seeking.

What does Dave Ramsey recommend? Dave Ramsey’s Baby Steps is a financial plan to get out of debt and become financially free. Dave Ramsey recommends starting with a $1,000 emergency fund, paying off all debts except for your mortgage, then saving from 3-6 months of expenses before moving to the next step, investing 15% of your household income.

How do you fund your emergency fund?

Hopefully you have a good understanding of your cash flow (a working budget is helpful here). This will make it easier to find areas where you can free up cash to divert to your emergency fund. Consider treating your emergency fund like a bill and sending a predetermined amount to your emergency fund each pay cycle, or month. A good way to do this is to automate it through automatic deduction or payroll deduction. You can also find areas to cut back from your regular budget, or send any overages to your emergency fund. For example, if you budget $500 for groceries and only spend $400, you can save the $100 toward your rainy day fund instead of spending it elsewhere. Other ideas include funding your account with bonuses, tax returns, income from a side job, etc.

What about using credit cards or other credit for emergencies?

The point of an emergency fund is to avoid using credit for unexpected expenses, so while using a credit card or another loan is certainly an option, it is one that should be a near the end of the list. Using credit for an emergency can make the problem worse because it will put you deeper into debt. The clock is always running on the interest and it may take you months or even years to repay the loan. Credit cards and other loans can be convenient when you take them, but it is rarely convenient to repay them.

What about tapping into retirement funds?

This should be considered a last case scenario because can set your retirement planning back several years. You can repay a 401k loan, but it will still end up hurting your retirement fund. If you make a withdrawal from a retirement account instead of taking a loan then you will be subjected to immediate taxes and possibly early withdrawal penalties if you are under the minimum withdrawal age.

One of the best financial decisions you can make

An emergency fund is one of the most important financial steps you can take after becoming current on your living expenses and graduating from living paycheck to paycheck. And with a little planning and luck, it can help you manage unexpected expenses and avoid going into debt.

{ 8 comments }

.
Page 5 of 176« First...«34567»...Last »
function analytics_code() { ?>