Date: Thu, 14 Dec 2006 08:41:30 -0600
From: zxcvbob 
Newsgroups: misc.invest.financial-plan
Subject: Re: canceling an IRA
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Skyman wrote:
> I just turned 18, and I opened a Roth IRA with my bank.  They a 5.75%
> fee on everything that I invest.  Then there's the 0.7% fund management
> fee annually.  I called them 48 hours after I opened it and told them
> that I wanted to cancel it.  I found out that Fidelity.com would not
> charge this mysterious 5.75%  on every investment.  So I opened an
> account with Fidelity and invested some into that account (BTW,
> fidelity has awesome customer support).  My bank called me back today
> (it's been about a week) and told me they couldn't cancel it.  The
> investment company my bank uses is called American Funds.  So my
> question is: Is there any kind of law that gives me a few days to
> change my mind and cancel the account?
> 
> So far, my search on google has been fruitless.  My other question is,
> would it be right if I filled a complaint with the Better Business
> Bureau against both my bank and American Funds?  I figure, if I can't
> close the account, I will rollover the funds into my fidelity account
> so I'm not putting anymore money into their pockets.  Any help would be
> greatly appreciated.
> 
> Thanks in advance,
> 
> Skyman
> 


Here's my opinion; I am not an expert at such things, but do have some 
experience.

That 5.75% is a sunk cost.  You will not get it back, so don't factor it so 
much in your decisions what to do with that account.  Since this is an IRA, 
the most we could be talking about is $230 (.0575 x $4000, the maximum you 
can invest in an IRA in a tax year.)  You learned a lesson for $230, 
probably less.  That's pretty cheap.

I can't tell if the .7% was a bank-imposed account fee or a fund-imposed 
fee.  Reputable front-end load funds have very low management fees (because 
they charged you up front for the management) so you might as well leave 
that money in the find that it's in if the investment was reasonable to 
begin with.  You don't have to ever put another penny in the account.  Open 
another IRA somewhere else that offers lots of different fund families, and 
some day you might want to roll over that bank IRA into the discount broker 
IRA (especially if it gets rid of any annual account maintenance fees 
charged by the bank.)

Don't let this discourage you from saving and investing for your 
retirement.  I opened an IRA back in the 1980's just a couple of months 
before the stock market crashed.  It scared me away from the markets, and I 
didn't start saving for retirement again until 1998.  Now I'm trying to 
catch up for those lost 10 or 12 years.

Good luck, and best regards,
Bob