Roth IRA/Lending Club question

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Roth IRA/Lending Club question

Postby Gettingrich » Fri Feb 08, 2013 5:11 pm

First off
Last edited by Gettingrich on Mon Mar 10, 2014 1:12 am, edited 1 time in total.
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Re: Roth IRA/Lending Club question

Postby NYBoglehead » Fri Feb 08, 2013 5:41 pm

You have until 4/15 to contribute for 2012, it doesn't matter that the account isn't open yet.

Regarding Lending Club, this might be a classic example of chasing yield. I strongly urge you to consider an equity and bond approach, and if you'd like to try Lending Club do it with whatever money is left over after maxing out a Roth IRA and a 401k at work if you've got one.
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Re: Roth IRA/Lending Club question

Postby interplanetjanet » Fri Feb 08, 2013 5:42 pm

It's absolutely possible. When you make a contribution between 1/1 and 4/15, Vanguard will ask which tax year it is for.

Having said this, you may want to look at the larger picture. If you have access to a work retirement plan with a match, you should probably put money there first. Depending on your tax situation you may want to look at contributing to a Traditional (deductible) IRA rather than a Roth, but that's not possible to tell without seeing more of your financial picture.

I think you may get mixed opinions on whether to go with Lending Club for your IRA funds when you can. I'd recommend getting experience with passive index fund investing before you try to get fancy - and realize that risk and *potential* reward are usually strongly coupled.
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Re: Roth IRA/Lending Club question

Postby NorCalDad » Fri Feb 08, 2013 6:12 pm

Also, keep in mind that Lending Club charges some pretty big fees unless you're willing to put $5,000 in this year and then $5,000 more next year.

To qualify for a No-Fee IRA through SDIRA Services you must have an initial minimum balance of $5,000 or more in Lending Club Notes and maintain this minimum invested balance for the first 12 months. To continue to qualify for the No-Fee IRA after the first year, you must maintain an invested balance of $10,000 or more in Lending Club Notes. All account balances are determined as of the last business day immediately prior to the anniversary date of the opening of your account. An annual fee of $100 applies to accounts that don’t meet these requirements. Lending Club reserves the right to modify or discontinue this offer at any time. See the SDIRA Services IRA Fee Schedule for a description of the Basic IRA asset type limitations on your Lending Club Self-Directed IRA Account.


I was looking at this as one option, but opted against because the contribution requirement is higher than I wanted to invest. Since you don't have a Roth IRA right now, you'd have to house virtually all of your Roth IRA space in high-risk Lending Club notes. Or you'd have to pay big fees. Neither makes sense to me.
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Re: Roth IRA/Lending Club question

Postby Gettingrich » Fri Feb 08, 2013 6:26 pm

My situation is unique.
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Re: Roth IRA/Lending Club question

Postby Gettingrich » Fri Feb 08, 2013 6:39 pm

NorCalDad wrote:Also, keep in mind that Lending Club charges some pretty big fees unless you're willing to put $5,000 in this year and then $5,000 more next year.

To qualify for a No-Fee IRA through SDIRA Services you must have an initial minimum balance of $5,000 or more in Lending Club Notes and maintain this minimum invested balance for the first 12 months. To continue to qualify for the No-Fee IRA after the first year, you must maintain an invested balance of $10,000 or more in Lending Club Notes. All account balances are determined as of the last business day immediately prior to the anniversary date of the opening of your account. An annual fee of $100 applies to accounts that don’t meet these requirements. Lending Club reserves the right to modify or discontinue this offer at any time. See the SDIRA Services IRA Fee Schedule for a description of the Basic IRA asset type limitations on your Lending Club Self-Directed IRA Account.


I was looking at this as one option, but opted against because the contribution requirement is higher than I wanted to invest. Since you don't have a Roth IRA right now, you'd have to house virtually all of your Roth IRA space in high-risk Lending Club notes. Or you'd have to pay big fees. Neither makes sense to me.
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Re: Roth IRA/Lending Club question

Postby NYBoglehead » Fri Feb 08, 2013 6:53 pm

At the end of the day you are going to do what you are going to do, but I would just suggest this: if you are going to put money into Lending Club do it outside of an IRA. Use the tax-advantaged space for traditional investment vehicles. If you are only 25 you are counting on Lending Club being around for another 34.5 years. I'm not making any predictions and I hope you do well, I just think you are taking enormous risk by going that route.
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Re: Roth IRA/Lending Club question

Postby interplanetjanet » Fri Feb 08, 2013 7:10 pm

Gettingrich wrote:My situation is unique. I'm a 25 yr old professional sports bettor, so I have no 401k, or anyone matching anything.

I'll actually have to set up a Traditional and convert it into a Roth, because of my income this year.

Why are you doing the Roth conversion? Since you don't have an employer plan, your TIRA is automatically deductible regardless of income (assuming for the moment that you are not married to someone who participates in a qualified plan). If your tax bracket is high now, doing the conversion probably doesn't make sense.

In that situation I would make a TIRA contribution and leave it there.

Edit: If you run your betting like a business (which it sounds like), consider setting up a "Solo" 401k. This isn't that hard and gives you access to much more tax-advantaged space. You could then contribute up to $51k to that (depending on your net income) and also fill up a backdoor Roth IRA.
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