On Mar 20, 4:21 am, AsymF <fearful.asymme...@[EMAIL PROTECTED]
> wrote:
> I was considering opening a SEP-IRA with our local SECU, but they show
> an APY of 3.50%. Most figures I hear about are in the neighborhood of
> 10-12% APY. Why would the SECU be so comparatively low on their APY?
A SEP-IRA is nothing more than a shell for investments that allows for
certain tax rules as established by the internal revenue code.
Think of an IRA as your left pocket and a regular brokerage account as
your right pocket. They are the same. However, your left pocket has
one set of tax rules and your right has another set of rules. Now
suppose your investment is a dollar. You can choose to put that dollar
into whichever pocket you prefer and it's still a dollar and it's
still expected to grow (or not) by the same amount. The pocket (or
IRA) does nothing more than define the tax consequences.
NO IRA has a promised APY. An IRA can have myriad investments inside
of it. CDs, mutual funds, stocks, bonds, REITs, etc can all be owned
in an IRA each with it's own potential return. Your potential return
is based (in part) on the risk associated with the investment you
pick.
My guess, is that your credit union (cough, cough... idiots) has done
you the "favor" of picking the investment inside of your IRA for you.
Likely money market or CDs. The investments are safe and therefore
have a low return. You could just as easily open an IRA and put mutual
funds or some other investment inside of it and POTENTIALLY make the
10-12% return you are looking for. Remember there are no guarantees.
I'm glad you asked your questions and please continue to do so. That
said, your question suggest that you have a lot of learning left to
do. Before you dive into this, seek a professional that is qualified
to help you. Find a fee-based CFP or even a respected friend that is
knowledgable in this area. The credit union is doing you a great
disservice. I speculate that the person you spoke to isn't even
licensed to sell securities and therefore defaulted you to CDs.
>
> Who could I go with to earn upwards of 10% APY or higher on an SEP-IRA?
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