Where should you invest in an IRA plan? Among the possibilities from institutions competing for your dollars: Mutual Funds
Reg Green of the Investment Company Institute calls them "an ideal vehicle" for an IRA plan because of their variety. There are funds for the "ultra-conservative" investor or riskier ventures -- "if you are quite aggressive" -- in growth funds that put money into "little companies in high technology."
Within a "family" of funds, managed by the same company, "you can swap as many times as you want," paying only a fee of perhaps $5 each transaction. "There's the convenience factor." Mutual funds have been accustomed to dealing with small investors for many years. He predicts mutual funds will pick up about one-third of the IRA market as it develops. Stockbrokers
Bill Kirvan of stockbrokers Merrill Lynch advises mutual funds for the small investor who doesn't normally follow the stock market, because you get "professional money management." If you want to play the market yourself, you can establish a Self-Directed Account and invest, for example, in money-market funds, certificate of deposits, stocks or bonds. The cost: an initial $25 start-up fee, $40 annual account-maintenance charge, contributions of $300 at a time. Banks
To Nina Gross of the American Bankers Association, the advantage of establishing your IRA at a bank is that "your money is insured. You've provided for retirement security." She's been traveling around the country for three months giving IRA workshops for bankers. "They are really gearing up."
At this point, Washington's Madison National Bank, says Glenn Schickler, is offering two options: an 18-month Time Deposit Open Account with a variable rate of interest, adjusted monthly, and a 2 1/2-year fixed-rate investment or certificate of deposit. Rates will be tied to Treasury securities. The minimum contribution may be $500 or $1,000, with no set-up or administrative fee anticipated.
The variable is advisable when rates are rising; the fixed when dropping. Your choice, he says, "depends on which way you see the rates going. It's all a crapshoot." Savings and Loan Offices
IRAs also are federally insured up to $100,000. Perpetual American has decided to offer both a "fixed rate" and a "variable rate" certificate over a 2 1/2-year term, says Doug Rogers. He expects some IRA investors may use both.
The fixed rate will be set at the actual 2 1/2-year Treasury bill rate when the account is opened (recently, 12.7 percent). The minimum deposit to open an account: $250, with additional deposits of $50 to be made at any time. The variable rate will change on the first day of every month, set at the 2 1/2-year Treasury bill rate, plus 1/2 percent (with a 10 percent minimum guaranteed, and a maximum of 18 percent). Opening minimum: $100, with $50 additions. Insurance Companies
Michael Stuntz, spokesman for the American Council of Life Insurance, says they're going after the IRA market "pretty hard." Primarily offering two types of "flexible premium" annunities that will make payments from retirement until death.
The "fixed rate" annunity guarantees a small rate of interest (about 4 percent), though the earnings rate could be higher -- in this first year perhaps 13 to 14 percent. The "variable rate" annunity buys into mutual funds; earnings fluctuate with the market.