Roth IRA ???????????????

13 Replies

Newbie here,I’ve done some research on the Roth IRA,I’m still kind of lost as to where to get started. I have about 5k to invest ,not sure if I want a self directed Ira or Robo advisor. I would really appreciate some recommendations.

@Michael O.  

You can open an IRA at most banks an/or online. It is simply an account that you can buy and sell stock/bonds, ETFs and the like while not paying taxes until you retire.

At this point in your life a vanilla IRA is all you need, since most Self Direct IRAs have fees to administer them, which will eat up your $5k.

Save up your money for a few years and then look into Self Directed accounts down the line.


With such small amount doing self directed IRA would be hard to justify. Investing in real estate, private lending or event some funds would require larger amount of money. Just open Vanguard IRA and invest in one of their index funds until you have substantial amount enough to do alternative investment- then you can reconsider self directed IRA.

@Michael O.   That is a personal decision that depends on what you plan to invest in and how much risk you are willing to take with the funds (really how much you will rely on this money in your retirement)... 

For me, SDIRAs make sense if you want to invest in syndication, notes (performing and/or non performing), are making private loans, ect. To play in those space you need $300k-500k; at least in my opinion. 

Others may have different ideas, but I haven't heard any convincing arguments for having a SDIRA with less than $100k.

Originally posted by @Michael O. :

Thanks a lot for reply,I very much appreciate it. What amount would be worth opening a SdIRA ?

Maybe $25k. Technically, even $5k can be used to start doing real estate. For example, buy options. But it is a more advanced strategy, and I would not recommend it to someone new.

I suggest you start reading as much as possible about self-directed IRA investing and, if available in your area, attend local REI meetings to network with people who do it already. You might even be able to find someone who can guide you - but trustworthy mentors are a scarce commodity, unfortunately.

@Michael O.

Here is a quote from this FAQ published by one of the many companies that specialize in SDIRA:

I only have a small IRA. How can I buy real estate?

There are at least 4 ways you can participate in real estate investment even with a small IRA. First, you can wholesale property. You simply put the contract in the name of your IRA instead of your name. The earnest money comes from the IRA. When you assign the contract, the assignment fee goes back into your IRA. If using a Roth IRA, this profit is tax-free forever! Second, you can purchase an option on real estate, which then can be either exercised, assigned to a third party, or canceled for a fee. Third, you can purchase property in your IRA subject to existing financing or with a non-recourse loan from a bank, a hard money lender, a financial friend or a motivated seller. Profits from debt-financed property in your IRA may incur unrelated business income tax (UBIT), however. Finally, as mentioned above, your IRA can be a partner with other IRA or non-IRA investors.

My comment: don't attempt any of the above without talking to knowledgeable tax and real estate advisors first. You can find many of us on this forum.

@Michael O.

Why are you opening an IRA? I personally think that a ROTH IRA is only good if you have a low income, like under 30k a year. Otherwise, it's better to save on the taxes and get a traditional IRA. I would put the 5k into a vanguard S&P index fund or EFT like VTI. IF you even want an IRA! You don't necessarily need an IRA at all. You could just keep the funds liquid. I wouldn't get a self-directed IRA until you have 100k. Again, these are my personal opinions on what works for me, I have not idea what works for you!

Originally posted by @Lee Ripma :

@Michael O.

I personally think that a ROTH IRA is only good if you have a low income, like under 30k a year. Otherwise, it's better to save on the taxes and get a traditional IRA.

Roth IRA almost every time. The difference is - would you rather pay taxes on the seeds (Roth) or on the harvest (Trad.)?

Yes, harvest comes later, and you do "save" now by not paying taxes on the seeds. However, with Roth, you will pay taxes on the harvest eventually. If your seed is $5k, and your eventual harvest is $100k - you will always win with Roth.

@Michael O. I second what @Michael Plaks stated about Roth. 

To answer your original question, with $5k in hand you're better off with Robo advisers. They "plant the seeds" in ETFs for you and some even do tax harvesting. Google the comparison analysis. There're about 4 or 5 good ones so you'll have to chose one based on your personal preference. 

If need help, feel free to PM me.


I agree with @Michael Plaks on a Roth IRA, I don't see tax rates going down in the next few decades and ideally if you are investing in real estate your income and therefore tax bracket may even be the same or higher in retirement. With a Roth once you pay the initial tax you are done forever and get to keep the entire harvest.

What's your end goal? You can start off with a S&p 500 fund and then get more fancy as your capital grows. I think the SDIRA is a whole different animal compared to a ROTH. With most of the providers out there, the fees start going down once you get sizable amounts in a fund, think 10k+.