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Starting A Roth IRA With $500

Posted By Jim On 07/26/2007 @ 4:52 pm In Investing | 19 Comments

Nashawn recently asked on my post about opening a Roth IRA right this minute [3] for some advice as to how she should invest $500 with a Roth IRA. She’s looked at Vanguard’s mutual fund accounts and ran into the minimum balance requirement for each of the funds. At Vanguard, the STAR Fund has the lowest minimum balance with $1,000 – a good $500 more than what Nashawn has at the moment. If I were her, this is what I’d do…

Wait Until April 15th Next Year

You have until tax day next year to contribute to your Roth IRA this year. That is, you have until April 15th, 2008 to contribute to your Roth IRA for 2007, giving our heroine a good nine months to try to get her balance up to $1,000. This is predicated on the fact that you are sold on Vanguard’s mutual fund accounts.

Consider Another Brokerage

You don’t have to go with Vanguard and you don’t even have to go with their mutual fund account, with a regular brokerage account your account balance minimums are lower than $3,000. TradeKing [4], Sharebuilder [5] and Zecco [6] are atypical brokerages that don’t have account minimums and both are known for their cheap/free trades. That’s crucial for a balance of $500. TradeKing has no custodial fee but Zecco charges $30/yr and Sharebuilder charges $25.

When it comes to the bigger brokerages, your pickings get slimmer. Fidelity will waive their minimum of $2,500 if you can commit to a $200/month contribution (Fidelity has no annual fee). If you can commit to that, you might as well wait a few months and go with Vanguard (if you wanted).

Summary: If you’re sold on Vanguard and can wait, wait; otherwise there are plenty of other options out there whether you want a discount brokerage like TradeKing or a more traditional name like Fidelity, just keep an eye out.

If you know of any brokerages with low account minimums and low annual fees for Roth IRAs, please share!


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/starting-a-roth-ira-with-500.html

[3] opening a Roth IRA right this minute: http://www.bargaineering.com/articles/go-open-a-roth-ira-right-now.html

[4] TradeKing: http://www.bargaineering.com/articles/r/tradeking.php?tag=500rothIRA

[5] Sharebuilder: http://www.bargaineering.com/articles/r/sharebuilder.php?tag=500rothIRA

[6] Zecco: http://www.bargaineering.com/articles/r/zecco.php?tag=500rothIRA

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