A few days ago, I was telling my husband about all the research I had been doing on ETFs for my new Roth IRA. I said “In 30 years, you’re gonna be so glad that you married me!” He laughed, and agreed that yes, maybe in 30 years he would be glad he’d married me. Who knows – maybe it’ll only take 20 years!
I opened a Roth IRA this week, using $500 of the money we got from my ring. I have my account at TD Ameritrade, which is where my traditional IRA is as well. When we set up our traditional IRAs with them, we each bought into an index fund, and then had our automatic contributions sent to that same fund each month. There was a $50 fee to buy each index fund upfront, but then we were able to contribute each month with no additional fee.
With my Roth, I was looking at ETFs and found a few that I liked. Ameritrade charges $10 to buy as many shares of an ETF as you like, but each ETF is another $10. And if I buy one and then want to buy into it each month, I’ll pay $10 every month. Hmmm. So here’s my grand plan… I’m going to settle on one ETF and buy as much of it as I can with the $500 that’s in my account right now. Then, for the next three months, I’ll take $250/month and put it into our HELOC, instead of having it automatically sent to Ameritrade. I can just do it on the same day that my husband’s automatic deposit to his IRA goes through – that way I won’t forget to do it. So at the end of 3 months, I’ll have $750 in the HELOC that I can transfer to Ameritrade. At that time, I’ll pick another ETF and buy $740 worth, and pay the $10 fee. If I do that every quarter, I’ll pay $40/year in trading commissions (less than the fee to buy one index fund), and I’ll have an opportunity to balance my portfolio on a regular basis. In the past, I’ve been known to let funds get a bit moldy, so having to go in every quarter and at least look at what I have going on is probably a good thing. The rate on our HELOC is currently 8.35%, so letting the money sit in that account for a few months will lower the interest we pay on the HELOC – a double win.
I’m sure there are much more efficient ways to manage an IRA, but I think this will work well for me. I’m committing to the $250/month (I had been at $200/month with my traditional IRA, so this is a step up), but more is always a possibility. Gotta work hard to make sure my husband is glad he married me by the time retirement rolls around!