Author Topic: Switching institutions  (Read 1563 times)

Gilead1986

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Switching institutions
« on: January 24, 2015, 10:25:50 AM »
I'm not too concerned about RE right now, more along the lines of FI and not worrying about much financially when I'm older.  I'm still new to the investing side of PF, especially Mustachian views.  I've focused mostly on saving and reducing, I see that it's dumb not to be doing both. 

Now that I'm discovering the folly of my youth and correcting those financial wrongs; I have a Roth IRA at my Credit Union that only pays 1.26% interest annually (it's basically a Roth IRA CD).  Originally I bought into it some years back just to have access to that branches line of credit for a mortgage or car loan.  Now that I've assumed I probably wont be using either of those aforementioned things, and have no need of $5500 making a pittance on interest.  Should I roll this over into my Vanguard Roth IRA into target funds?  Is it worth taking the hit on this money for the transfer fees and putting it into a volatile market, or should I just leave it alone? 

GGNoob

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Re: Switching institutions
« Reply #1 on: January 24, 2015, 12:11:55 PM »
I think having a Roth IRA in something that's barely earning money is a waste of Roth space. You are probably losing value to inflation. I'd personally get it out of there and invest it. Even something simple like a Target Retirement Fund at Vanguard would be much better.

Is the credit union charging you a lot of fees to close this account? I know there won't be any fees at Vanguard.

MDM

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Re: Switching institutions
« Reply #2 on: January 24, 2015, 12:12:52 PM »
I have a Roth IRA at my Credit Union that only pays 1.26% interest annually (it's basically a Roth IRA CD). 
...
Should I roll this over into my Vanguard Roth IRA into target funds?
Yes.

Do the calculations on the future value of compounding $5500 at 1.26% vs., say, 5% and compare to whatever fee you may be charged.

SaintM

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Re: Switching institutions
« Reply #3 on: January 24, 2015, 12:33:08 PM »
Your CD is earning $69/year. The standard early termination penalty for a CD greater than a year is equal to 6 months of interest, or about $35. The credit union may charge a similar amount to transfer the funds in the account to another institution.

Here is something to think about: your CD earns 1.26%. The SP 500 yields 1.87%, plus you have the opportunity for appreciation.

Gilead1986

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Re: Switching institutions
« Reply #4 on: January 24, 2015, 01:00:53 PM »
Definitely calling them Monday morning and transferring to my Vanguard account.  Thanks guys.