October 08, 2017

USAA Roth IRA — Everything you need to know

USAA Roth IRA
BOTTOM LINE — USAA is a solid provider for Roth IRA accounts, but beware higher fees compared to other providers, especially if you expect to make frequent changes.

USAA offers Roth IRA accounts. A Roth IRA is a retirement savings account allowing you to put taxed money into the account to grow tax-free and to be withdrawn tax-free once you meet requirements. We’re written extensively on the benefits of a Roth and encourage all our readers serious about saving for retirement to take advantage of the benefits.

There are many requests to go over the pros and cons of USAA’s Roth accounts. We’ll provide a review here as well as some of the frequently asked questions around management of the account. You may already have a Roth account through USAA or thinking about opening one.

The USAA Roth IRA at a glance

Overview

  • Best for: Military personnel
  • Account setup fee: $0
  • Trade fee: $8.95
  • Annual fee: $0
  • Account minimum: $500 or $50 per month through automatic monthly investments
  • Minimum investment: Depends on investment product you choose. Can range from $50 to $500.
  • Max investment: Subject to Roth IRA contribution limits of $5,500 per tax year if under 50 years old and $6,500 per tax year if 50 years or older

Contact information

USAA Investment Management Company
P.O. Box 659453
San Antonio, TX 78265-9825

USAA Roth Account

USAA formed following World War 1 in San Antonio, TX by army veterans struggling to find providers for automobile insurance. Fast forward to today, the company is a fortune 500 with nearly 12 million members. It has been an attractive provider for financial and insurance services to military personnel and their families.

USAA providers Roth IRA accounts. These accounts are insured by the FDIC usually up to $250,000.

How to open

Anyone is eligible to open a USAA Roth IRA account. Typically, you’ll do the following:

  • Open an account with USAA: Opening an account is straightforward — as most providers—but you’ll want to consider factors like fees, investment options, and web experiences which will make it easy for you in the long run to manage your account. Opening is the first step to reaching your retirement goals, but you want to continue investing in your fund regularly — this is where you’ll see returns which grow and provide a nest egg. You can open your account on USAA’s website.
  • Fund the account: You need to pick investments like securities, bonds, and index funds for your Roth. Think of your Roth as more of a container for these financial products. You can choose your preference for these. Popular options are funds which mimic the S&P 500, target retirement funds, and many more.
  • Contribute regularly to the account: Contributing often to your Roth IRA is crucial for reach your retirement goals. You can contribute a maximum of $5,500 per tax year if you are under 50 years old and $6,500 if you’re 50 or older. Minimum contributions depend on the type of financial products (like index funds) in your Roth and will be specified when selecting them.

How to manage your account

USAA offers managing the account through their website: https://www.usaa.com

You can setup automatic investing to your account, which can be a great way to avoid the manual effort of contribution. It’s also a way to “set it and forget it,” allowing you to keep a consistent stream of funds to your retirement account.

How to close your account

If you have a USAA Roth account which has been funded or contributed to, you’ll typically want to transfer this money to another brokerage. Closing it assumes you have an empty account which can be the case after you transfer. USAA makes opening the account easy, but to close, you’ll usually need to call them directly at 800-472-8722.

Fees

Transferring

Brokerage accounts like USAA and Vanguard allow you to transfer the accounts to one or the other. USAA charges $70 to transfer the full assets as a one time charge. They charge $20 for a partial transfer.

Trades

USAA in general has expensive trade fees. These are better for the passive investor. If you expect to be trading financial products with your Roth regularly, make sure you are considering fees. * Stock and options trade fee: $8.95 * Mutual fund fee: $8.95

Advisors

USAA like all brokerages offer advisor services or managed portfolios. Your Roth IRA account is no different. These fees start at about $23 per month. Most folks investing for retirement do not need managed accounts through advisors! Retirement savers can instead achieve much better savings by funding index funds through their Roth avoiding expensive advisor fees which can make a dent in savings in the long run.

Investments

USAA offers a wide range of investment opportunities across index funds, money market funds, bonds, and stocks. Each type has different qualities like how aggressive you are approaching growth (and the risk associated).

The best performing investment, which recently has been index funds tied to US stocks like the S&P 500, can often be those which perform the worst in bad economic times.

Transferring and rollovers

Transferring, often called a "rollover," is moving a Roth IRA account from one brokerage (like Vanguard) to another (like USAA).

Be aware of fees when doing this. USAA charges $70 to transfer your account to another provider.

When transferring, you’ll usually have interactions at both brokerages.

A lot of readers find Vanguard a preferable financial provider and find themselves transferring their Roth account from USAA to Vanguard. If you are transferring to Vanguard, you’ll find a set of instructions through them. Make sure you are doing a “trustee-to-trustee” transfer, as you do not want to change account types and risk tax complications.

Withdrawals

Roth IRAs allow qualified tax-free withdrawals. One perk is you are eligible to withdraw contributions or conversions at any time. However, there are rules on withdrawals on your gains. You can withdraw funds in your USAA account using the Withdraw From Your IRA link under the “Investment Account Services” section.