American Funds IRA review: ROTH IRA, 401k Rollover, Traditional IRA, SEP and SIMPLE IRAs. American Funds retirement accounts fees, commissions, rating, minimums, advantages and disadvantages.


American Funds Overview

Today’s investing world is a confusing place - the market’s volatility, the government’s effect on interest rates, and more lead to investors scratching their heads! In addition to all these factors, you also have to evaluate the thousands of investment choices out there. What is best for your money and your personal needs? Clearly, everyone has different needs, so it is important to find an investment company that works for you.

One such place for investing that I have chosen to work with is American Funds. They have a variety of accounts and account types - from basic investment accounts to 401ks to 529 accounts. However, I am going to focus only on their IRA accounts.

American Funds IRA Pricing

When selecting investments and investment companies, you always want to consider fees and expenses. These can eat away at your portfolio whether or not the market is going up or down! Annual fees can range from a low of $10 to $150 depending on what company you use.

American Funds annual IRA fee is $15. Most brokerage firms now don't charge any annual IRA fees.

For management expenses within a fund, fees can range from 0.57% to 1.32% depending on which fund you choose. These management expenses are high compared to funds with other providers. Vanguard, for example, has lower fees on many of their funds. They are not abnormally high though. Some fund companies have much higher fees. Transamerica Mutual Fund fees, as an example, go as high as 4.05%.

American Funds IRA Investment Choices

American Funds account offers many funds in different asset classes. An investor can select within their IRA any mix of investment options they have available as long as there is a minimum of $50 in each fund. With 58 different funds to choose from, it is easy to diversify your portfolio to include growth funds, income funds, international equity funds, and more.

But what if the investor doesn’t feel capable of selecting funds for their portfolio? If picking funds is not the investor’s specialty, American Funds IRAs have the Target Funds available. An investor selects the year they plan on retiring and American Funds managers will tailor their investment model to suit that investor. The managers will make changes as needed - monitoring the investments within the fund and changing the asset class allocations as time goes on. For example, if an investor is planning on retiring in 20 years, their current allocation will be more heavily weighted than an investor who is planning on retiring in 2020. However, as they get closer to their retirement date, the fund manager will switch the portfolio to a more conservative allocation.

If an investor wants to put more input into their portfolio than a target date fund but still doesn’t want to pick individual funds, the American Funds also has their Portfolio Series available within their IRA. The Portfolio Series funds are what is known as a fund of funds. These funds are comprised of a number of American Funds mutual funds.

American Funds Returns

American Funds also have comparatively good returns compared with many mutual fund families. For this year, every fund (with the exception of the American Funds Money Market Fund which has no return) in their line-up has a positive return.

The Good

Another positive to the American Funds experience is the customer service. The wait times on the phone are typically minimal.

The website is very easy to use and has a lot of information available. An investor can access their accounts, link their bank accounts to their American Funds accounts to transfer funds, change investments online, and also research different investment options. Their website has really kept up as technology has changed and advanced, even allowing accounts to be opened without paper forms.

An investor can also choose to receive statements electronically so there is not so much paper being mailed. The statements, whether electronic or paper statements, have a wealth of information on them. An investor sees a summary of the entire time they have owned the fund as well as for the time period the statement addresses. The statements contain a graph of the asset mix within the portfolio. These are great pieces of information that arrive 4 times per year at the end of every quarter.

The Bad

American Funds charges annual IRA fee in the world where there are many discount brokers, such as Ally Invest and TD Ameritrade, that don't charge any IRA fees. Also, the company's mutual funds expense ratios are higher than in most funds offered by online brokers.

American Funds IRA Account Review Conclusion

Overall, the American Funds has a decent IRA product. It is user-friendly and easy to understand. There are, however, better option available at a more reasonable price.

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American Funds IRA reviewed by Rating: 3