Is Farm Bureau a good company 3-star brokerage rating

Farm Bureau IRA Review for 2022


Farm Bureau IRA Introduction


Farm Bureau is an American Financial Services company which offers a variety of products such as life insurance, auto insurance and ROTH IRA’s. This article will review the ROTH IRA from Farm Bureau. This product is a good beginning product in which to begin building a portfolio. This article will examine the rate of return, the advantages, and the disadvantages of investing with Farm Bureau’s ROTH IRA. The analysis will show that Farm Bureau’s ROTH IRA is a good investment product for beginning investors or those who do not have much to save to be able to start a retirement savings. However, Farm Bureau’s ROTH IRA has some limitations which hinder its ability to get the rate of return which other products give.


Advantages of the Farm Bureau’s ROTH IRA


There are two main advantages to Farm Bureau’s IRA. First, the minimum investment per month needed on the account is only $25. This minimum investment helps those who may not have a lot to save start building a little bit of a retirement account. Farm Bureau also has no fees or transaction charges with your IRA. The $0 fee makes it so your money can consistently grow without having to worry about minimum balances, minimum contributions, or account maintenance fees. There are no transaction charges so the ROTH IRA is a very low maintenance account. All one has to do is set a recurring deposit into the account and peek at the statement when it arrives in the mail.

Second, the Farm Bureau ROTH IRA is a very conservative investment, so for those afraid of losing their money, this IRA has a very low chance of losing money 1. The Farm Bureau ROTH IRA functions as a fixed annuity which means your money is kept secure and you receive an interest payment into the account based on a flowing APR anywhere from 1.5-2% 2.


Farm Bureau IRA Review


As you can see from the screenshot, my IRA is on the lower side of possible interest gain right now. This IRA is useful to start a savings as 1.5% interest does not do a lot for small amounts of money, but if you contribute for 10+ years, then the interest compounding will build a savings greater than the amount you can contribute every month.


Disadvantages of Farm Bureau’s ROTH IRA


It will seem odd to say that the greatest strength is also the greatest weakness of the Farm Bureau Roth IRA. However, its conservative nature makes it so that the interest gained is not keeping up with current rates of inflation3. In addition, with the median inflation rate over the last year being 1.65% 4, the investment is running less than the median rate of inflation, thus, over a period of time this IRA will more often lose money to inflation than surpass it. So for example, in the screenshot, this person is contributing $75 to an IRA. That $75 currently is losing 0.55% to inflation over the projection of a year so the $75 dollars is actually worth $74.97 in purchasing power after a month 5. For a small contribution this is a very minimal difference, but with an account balance this .55% loss to inflation can be worth hundreds if not thousands of dollars over time. To make things easy, let’s round the balance on the screenshot to $5,000. If current rates of interest and inflation were to hold, then for a $5,000 IRA after a year, the purchasing power of the IRA would equal $4973.50 6. As one can see, the loss over time grows exponentially with the amount of time and the amount of money affected by inflation 7.

A second disadvantage with the ROTH IRA is that one cannot control investments in order to increase the rate of return. This ROTH IRA functions as an annuity so the owner of the fund has no say in how the money is invested or how to increase gains to beat inflation. For example, if one is an environmentally conscious person and she found out Farm Bureau was investing in fossil fuel companies, she cannot make the choice to say that she wants her money divested from the fossil fuel companies. The lack of choice greatly hinders the rate of return and possibly the moral sensibilities of the owner of the account.


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Farm Bureau IRA Review Conclusion


The Farm Bureau ROTH IRA cannot act as a stand-alone account to gain enough wealth for retirement. A 1.55% rate of return which may increase to around 2% is not enough to compound the money in the IRA to an amount which would enable a fulfilling retirement. The average IRA rate of return for other funds is 7% and allows the owner of the account to choose investments to help increase the rate of return. While the Farm Bureau ROTH IRA is a good starting investment for people who do not have much money, it is not a fund that will make you wealthy. I recommend this fund for college students who are looking to start to build a nest egg or for people who cannot afford to save much per month. Other than those scenarios, this product does not receive a recommendation. IRA’s are supposed to help people have money which can be invested and preserved for the future. Having an account that often loses purchasing power is not a great way to preserve money and build for the future. Writing this review has made this writer want to move his IRA money and this writer suggests that most people should stay away from this product.


Footnotes


1. See screenshot of ROTH IRA statement for an example of the interest rate
2. In footnote 3, the median is taken by adding the 6th and 7th numbers in numerical order and dividing by
3. 2.1% inflation rate vs. 1.55% Interest on IRA; calculation taken from $75*(.0055/12) = 74.54 rounding the decimal place to the hundredths place
4. $5000*.0055
5. From .03 to $26.50 over the course of 12 months. This exponential loss would only increase over the course of years.


About the Author
Arthur Chachuna is professional personal finance blogger, and the owner of Brokerage-Review.com. He has been an avid investor for 23 years, and has background in both applied math and programming.