Author Topic: Prosper Roth IRA  (Read 19985 times)

Wrats6

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Prosper Roth IRA
« on: October 20, 2012, 04:26:44 PM »
I am considering a Roth IRA with Prosper through Sterling Trust.  I've been told there will be absolutley no fees if the Roth balance remains above $10,000.  Does anyone have any experience in establishing a Roth IRA and are there indeeed no fees?  Also, any other comments/thoughts on the Roth IRA option will be appreciated.  Thanks

Peter

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Re: Prosper Roth IRA
« Reply #1 on: October 20, 2012, 07:55:53 PM »
I have looked at Prosper's IRA product in depth and it is true there are no fees for balances of $10,000 or more. I think if you are investing in Prosper and can do an IRA it is by far the best option. I will be opening a Roth IRA at Prosper myself next year.
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dagilbe

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Re: Prosper Roth IRA
« Reply #2 on: October 21, 2012, 09:27:14 AM »
Wrats,

I started a Roth IRA on Prosper a few months ago.  I highly recommend going through another self-directed service besides Sterling Trust.  Google Sterling Trust and read the not so stellar reviews of the company.  After contacting Prosper, an IRA specialist recommended starting  the Prosper Roth IRA through American Pension Services.  I started my Roth through American Pension and have been very happy with the decision.  Just like with Sterling Trust, Prosper has paid all fees relating to setting up the Roth account and has agreed to pay all management fees so long as I put another 5k next year for a total of 10k) into my Roth IRA account.  In order to minimize fees, write out a check to the self directed IRA manager (e.g. American Pension) and direct the company to issue a check to Prosper.  I believe there is a $25 charge to wire the funds to American Pension and another $25 fee to wire the funds to Prosper directly and writing the checks and directing American Pension to issue the check to Prosper was free of cost. 

The only real downside of the Roth IRA through Prosper is that you can't buy or sell notes through Folio.  Otherwise, I would highly recommend a Prosper Roth IRA because of the substantial tax advantages. 


Wrats6

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Re: Prosper Roth IRA
« Reply #3 on: October 21, 2012, 07:20:35 PM »
Thanks Peter and Dagilbe.  I mailed the forms to Sterling Trust this weekend.  So I guess I am too late to try your American Pension Services option.  I will be transferring $13,000 from my Vanguard Roth IRA.  If things go well, both the customer service and ROI, I may begin monthly transfers from my bank account of $500 to hit the $6,000 limit per year (I am 50 years old so the limit is $1,000 higher than the normal $5,000).  I've been averaging  a 13 percent ROI with Prosper fro 3 years now.  Hopefully all works out.  I'm a little nervous.

Peter

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Re: Prosper Roth IRA
« Reply #4 on: October 21, 2012, 08:39:29 PM »
I am intending to use Sterling Trust to open my IRA as well - I think you will be fine. Best of luck with the investment.
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MarkTrader

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Re: Prosper Roth IRA
« Reply #5 on: October 22, 2012, 10:22:17 AM »
Sorry, can I ask a dumb question?
I am also looking into the option of opening a Prosper IRA. So if you withdraw the money when you are 65 years old, all the income is tax free? But I am only 29. What happens if I need a portion of the money before than? For example, if in some years, I have $100k in the IRA and I suddenly need $20k, how do I take it out?

Peter

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Re: Prosper Roth IRA
« Reply #6 on: October 22, 2012, 01:54:03 PM »
There are IRS rules governing the withdrawal of funds from any retirement account. You can take out a loan from your IRA as long as you pay it back and you can take a withdrawal early but you will pay a tax penalty. The idea is that IRA should be used for retirement and not as regular savings so the rules are in place to make it more difficult for you to get at the money.
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graceful

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Re: Prosper Roth IRA
« Reply #7 on: November 04, 2012, 09:52:36 AM »
Marktrader,

I have two IRA accounts at Prosper. At withdrawal, you will allow funds to accumulate and then withdraw, or you can sell notes on FolioN and then withdraw. Very similar to liquidating a portfolio at Fidelity, sell the stocks and then withdraw the funds.

Since we have to liquidate by selling, we've been having conversations at another forum http://p2plending.forumatic.com/index.php about how to do this.

After running some experiments, it looks like it will be relatively easy.

Graceful

neals384

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Re: Prosper Roth IRA
« Reply #8 on: November 12, 2012, 11:23:21 PM »
Graceful,

Thanks for letting us know about the forumatic site.  But I went there and can't find the discussions you reference.  Can you help?

Neal

graceful

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Re: Prosper Roth IRA
« Reply #9 on: November 24, 2012, 02:19:27 PM »
Sorry, I just saw your question today for the first time.

Look at the conversations about FolioN to learn more about how to organize yourself to be ready to sell notes when you need to cash out more than the cash generated from payments.

http://p2plending.forumatic.com/viewforum.php?f=20

Graceful

HighROI

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Re: Prosper Roth IRA
« Reply #10 on: November 27, 2012, 08:07:33 AM »
Sorry, can I ask a dumb question?
I am also looking into the option of opening a Prosper IRA. So if you withdraw the money when you are 65 years old, all the income is tax free? But I am only 29. What happens if I need a portion of the money before than? For example, if in some years, I have $100k in the IRA and I suddenly need $20k, how do I take it out?

I see no one responded so here are a few of the basics. To withdraw money early there will be a penalty of 10% (with a roth ira you will pay regular income tax + 10%). There is a way to withdraw with no penalty if you withdraw a similar amount every year, Google "substantially equal distributions ira" (you will still need to pay regular income tax even with a roth ira). If you open a roth ira you can withdraw the initial contribution whenever you want no penalty and no income tax. You can withdraw certain amounts penalty free for purchasing a first home and medical expenses.
« Last Edit: November 27, 2012, 08:09:53 AM by HighROI »
                   

faeriering

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Re: Prosper Roth IRA
« Reply #11 on: November 27, 2012, 08:20:56 AM »
I think with the Roth, in order to withdraw the original investment, it has to have been invested for at least 5 years, otherwise there are penalties.  There's several good blogs out there that talk about how IRAs work and what the differences between traditional and roth IRAs are.  It is far more information than can be covered here in any depth.  The IRS even has some really good easy to understand resources describing the options.

subdood

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Re: Prosper Roth IRA
« Reply #12 on: January 24, 2013, 08:58:59 PM »
Hi guys and gals,
I think one thing you all are overlooking is the fact that Prosper won't let you trade your IRA notes through Folio.
I have an IRA with Prosper, through Sterling Trust.
Here is the HUGE problem. Once you buy a note in your IRA account, you own that note until maturity. There is NO WAY to get back out of that note.
I just got off the phone with Prosper to ask them what options I have to get my funds back out of the IRA. The response was that I have no options other than to wait until the notes mature.
I can transfer the cash that the account generates if I want too, but the notes I own, I have to hold until maturity.
There are no techniques you can use to get those notes converted back into cash.
Once you buy a Prosper note from within a Prosper IRA, You own it until it pays off or defaults.

You better be 100% sure that you will never have a need to get the money you invest into a Prosper IRA back in an emergency.

On the other hand, Lending Club lets you trade notes in an IRA just like they let you trade regular account notes. I could convert my Lending Club IRA notes into cash in a matter of days if I wanted to discount them enough.

I own regular and IRA accounts in both Prosper and Lending Club.

Jeff

TRPeterson

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Re: Prosper Roth IRA
« Reply #13 on: January 25, 2013, 07:04:04 AM »
Here is the HUGE problem. Once you buy a note in your IRA account, you own that note until maturity. There is NO WAY to get back out of that note.

While that is true, it's not quite as bad as it sounds.  I manage 3 Prosper accounts (cash, my IRA and my wive's IRA).  They all have an average repayment rate of 5%/month, meaning it would take roughly 20 to 22 months for all notes to become liquid.  If you had $50,000 invested, you could count on receiving $2,500/month in payments.  This assume you invest in mostly 36-month notes with maybe a 20% blend of 12- and 60-month notes. 

The average grade of your notes will affect this repayment percentage, higher risk notes = higher APR = higher repayment rate.  All my accounts average out to a C roughly, maybe a C-.  So if you were a more risky investor with an E average portfolio then your repayment rate would be slightly higher and your money returned faster.  Vice-versa, a more conservative A- grade portfolio would probably take over 2 years to become liquid.

I work within the IT department of a bank, so through osmosis I get to learn some finance/banking stuff I wouldn't have access to otherwise.  Apparently all loans made have a pre-determined early repayment rate 'assigned' by the bank.  So if a bank makes a 3-year loan, their loan accounting system automatically assume that loan will be paid off in 20 months ( + / - pending a lot of factors of course).

Hope that helps!
Terry
Prosper Cash XIRR ROI 16.05%
Prosper IRA XIRR ROI 15.28%
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Fiscal Sergeant

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Re: Prosper Roth IRA
« Reply #14 on: January 25, 2013, 08:12:34 AM »
Just a side note, the IRA limit was raised to $5500 this year.