If you’re like me you probably have a some sort of work related retirement program but beyond that you may also have a plan set up separate account such as an IRA or Roth IRA. What’s great about this is that it allows you to contribute on your own basis and save more or less as you want.
However recently I got my statement back from my current ROTH IRA provider and all I can say is that I am not pleased. My returns have been less than stellar and my account balance hasn’t grown much if any over the last few years. So in today’s article I thought I would point out a few things I’ve noticed and why it just might be the right time for me to switch retirement investments.
The first thing I obviously noticed with the account is that the returns have been horrible. I’ve had my Roth IRa with this company since 2006 and the balance has only manage to stay at pretty much the same amount since I moved it.
Now I haven’t been contributing to this account since I moved it but you would think that you would see some sort of growth. On top of that the account does have several thousand dollar in it and even with that amount of money in it it’s barely earned anything.
At this point I would have been better off sticking the money in an online savings account, or a certificate of deposit.
The Type Of Account Is To Limiting
The second problem with the account is that it is variable annuity, this is an annuity that is investing in the market similar to a mutual fund. If you have never had an annuity take my advice and don’t get one. I originally got it because it offered some attractive options to guarantee a portion of my earnings.
What I found out was the cost to add this to my annuity literally ate up all of my earnings. The reality is nothing is ever guaranteed even when it comes to savings accounts.
With savings accounts you run the risk of low returns that in most cases won’t even surpass inflation. On the other hand you have higher risk investments such as mutual funds or variable products. These types of investments are very risky and could end up losing you a lot of money if you don’t set them up correctly.
The Fees Are Too High
Finally, the last big reason you may want to consider switching investments is because of the fees. Every type of investment has different types of fees and for most people mutual funds are one of the most common investments people use for their retirement.
With mutual funds you will typically pay an initial sales charge around 4 to 6%, along with an annual fee around 0.5 to 2%. On top of that some mutual funds may even include junk fees such 12b-1 fees, which is basically a fee to cover a companies advertising cost.
In my case my annuity charged a 4% initial fee along with an annual fee. What’s worse was that if my account balance goes over the $10,000 threshold my initial sales charge would jump to 6% where with other investments such as mutual funds the sale charge will typically decrease when your account balance goes over a certain threshold.
Finally, the last thing I hate the most about this account and the reason I can’t move account until next year is that it has a surrender policy. A surrender policy basically means that if I move the money out of the account I could be penalized because of it. In my case my surrender penalty will last 8 years and isn’t up until 2014.
So there you have it. These 3 reasons have cost me big time with my retirement and now I’m on a mission to fix it. Next week I will be sharing with you 3 options I’ve been considering on where to move my money too. So what are your thoughts?
Is their any other reasons you should consider switching retirement accounts?