Ramit Sethi answers a viewer (Kelsey) asking how to start a Roth IRA. He explains three evaluation criteria—low fees/low expense ratios, automatic recurring investing, and responsive customer service—and recommends three providers he trusts: Vanguard, T. Rowe Price, and TIAA-CREF (noting Vanguard as his personal preference).
All right, we have a question here from Kelsey who wants to know about Roth IRAs. She asks. I haven't started a Roth IRA yet, but I intend to once I graduate from college. Where should I begin looking for the best one and how can I tell that they are good? Alright, I'm going to tell you how to decide whether one is better than the other. And then I'm just going to tell you which ones to open up or which ones I recommend because I've studied them exhaustively because I'm a huge weirdo. So first of all, when you look at these and evaluate these Roth IRA companies, you want to find one that offers you the ability to open up an account without huge larded up fees. A lot of these guys are going to charge you tons of fees. They're going to only offer funds that are just fattened with fees so that they can make a ton of money off of your money. No, we're not going to do that. The second thing you want to look for is Roth IRA companies that allow you to automatically invest on a regular basis. This is the cornerstone of the I Will Teach youh Be Rich model. It's about automation, not about having to write a check every month. If you have to do do that, you've already lost. Alright. And the third thing is good service. What I mean by that is you can call them on the phone and they can explain what's going on with your funds, what's your expense ratio, what is an expense ratio and what would be a recommendation for other people like you who are recent college graduates or 30 year olds or whatever. So I'm going to give you three companies that I like and I have no affiliation with these companies except that I recommend them and in some cases I use them myself. The first company I want to recommend is a place where I actually put my investment money and it is Vanguard. Vanguard is a very well known company with a lot of low cost funds. Their expense ratio, in other words, the amount that they charge you to service your account is very, very low. In some cases 0.18% or even lower than that. Sometimes that's very low compared to other people who might charge you 2%, which is tens of thousands of dollars over your lifetime. Forget them. Vanguard is a great company, you can call them up, you can say, look, I'm new to this, can you explain this to me? I'm a delinquent because I haven't read Ramit's book. And so instead of actually furthering my financial life, I'VE decided to just call you on the phone and pick your brain for free. All right. You could do that. They're a good company. Next, T. Rowe Price. I really like them. They also have very good low cost funds. Those are terrific. And the third thing is tiaa cref C R E F. All those are great. Personally, I like Vanguard, but I like all of them. And I would feel comfortable recommending them to any of my readers like I'm doing right here. So good job asking the question. Kelsey, congratulations on graduating, and I'm looking forward to hearing how it goes since setting up your Roth ira. Thanks.
