ShareBuilder (Free) Roth IRA Review

2010 March 3

Roth IRA Investing Can Be Free

Maybe you’ve heard that a Roth IRA is a good way to start saving for retirement.  A Roth IRA is a great way to start your retirement savings, or supplement your current investments, with tax incentives.  Basically, you invest after-tax money (Roth IRA investments are not an income tax deduction), however any gains are tax free, and withdrawals are tax free.  That’s what we call a “tax advantaged” way to invest for retirement.

So who offers these things?  Just about every bank will offer an IRA product, but fees are common and often the selection of investments are limited to bonds and CDs.  If stocks and mutual funds are available for investing, there are usually investing fees attached.

After some research,  I think ShareBuilder offers a great Roth IRA (or traditional IRA) program.  Bottom line:  it’s free.  Truly free. No monthly fees.  No transaction fees.  Even investing in mutual funds is free!

Before You Invest in an IRA…

Consider these investment opportunities first:

  • Have you paid off your credit card debt?  (That’s expensive money!)
  • Does your employer offer 401k/retirement matching, and have you maxed out their contribution?  (That’s free money!)
  • Do you have at least $1000 in savings for a rainy day?  (That’s liquid money!)

A few things to consider when choosing a Roth IRA provider, and how ShareBuilder’s IRA program stacks up.

  • What fees are assessed to the account?  (None!  If you do it right.)
  • Are automatic contributions possible?  (Yes, and they’re free!)
  • Is there a minimum initial investment? Minimum contributions?  (Depends on the fund, but typically $100 or less.)
  • What investment options are available? Stocks? Mutual funds? Bonds?  (Yes, yes, and yes.)
  • Is online investing over the web easy and clear?  (Their website is good, but a bit more complicated than some others I’ve used.)

Wait… is investing in a ShareBuilder IRA really free?

Maybe you’ve already noticed their advertisement, “$4 trades.” $4 is cheap, but not free.  Totally free is totally possible, if you follow three totally simple steps.

1)  Sign up using the “basic” plan, with no monthly subscription fee.

2) Use automatic investing, not real-time investing.

3) Invest only in the no-load, no-transaction fee (NTF) mutual funds.

That’s it!

Automatic Investing

You are not day trading stocks, so you don’t need real-time investing.  Investing automatically on a particular day of the week suits you just fine.  Automatic investing is set up to invest whenever there is cash available in your account.  All you have to do is choose which funds you want to invest in.  How to get cash into your account?  Just setup a one time transfer from your bank account anytime you have extra cash ready to invest.  Or set up an automatic reoccurring transfer.

NTF Mutual Funds

ShareBuilder is now owned by the ING DIRECT bank, so all ING managed mutual funds are NTF, as in fee free.  Check out the list of over 20 available ING (NTF) mutual funds.  (NTF funds are also available from PIMCO, American Century, and Dreyfus, though they typically require a minimum initial investment of $1000.)

Over 20 ING mutual funds are available, offering plenty of diversification options for the average retirement saver.  They’ve got the small cap, mid cap, and large cap funds, international funds, bond funds, and money market.  They’ve also got some decent tools to help you choose a fund if you’re not sure what you are looking for. (Tool 1 and Tool 2).  Also, try entering a fund symbol into google finance for a less cluttered interface to research past performance.  For example, here’s a fund I like currently: IGBOX.  Pretty safe for conservation of capital, but high interest dividends.

Ready to Get Started?

Head on over to ShareBuilder’s retirement website to sign up!

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