‘Your money is not actually invested’: Finance expert says Fidelity IRAs are just ‘glorified savings accounts’

A TikTok user exposes a common mistake that many people make when opening a Roth IRA account with Fidelity, a popular investment platform.

According to Vanguard, "A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement."

However, not all Roth IRA accounts work the same way. According to Dominique Jonae (@dominiquejonae), a 28-year-old remote software engineer and finance enthusiast, Fidelity’s Roth IRA has a hidden catch that could cost you thousands of dollars in potential returns.

@dominiquejonae Do NOT make this mistake with your Roth IRA #rothira #personalfinance #investing #moneytok #financetok #blackgirlmoney #blackmoney #buildingwealth ♬ original sound - Dominique Jonae

In a viral video posted on June 10, Jonae shared a “cautionary tale” about her friend who opened a Roth IRA with Fidelity and was disappointed with the lack of growth. She explained that her friend did not realize that he had to choose specific stocks or funds to invest his money in, otherwise it would just sit in a “glorified savings account” that barely earns any interest.

“I assume the setup is the same with other banks that offer a Roth IRA. But with Fidelity, specifically, when you contribute money to your Roth IRA account, it first goes into a sort of holding account. It’s a money market account, I believe, with Fidelity, it’s specifically SPAXX, which is a Fidelity government market account,” Jonae said.

She continued: “And it’s basically a glorified savings account. It’s interest-bearing, but the interest rates are very comparative to other savings accounts with like other banks. So you’re not really going to make any money. It’s just a stable holding ground for your money while you decide what stocks you want to allocate the money to.”

Jonae urged her viewers to make sure they invest their Roth IRA contributions in the market, otherwise they will miss out on the benefits of compound interest and tax-free growth.

“You’re not really making any money if you just contribute to your Roth IRA without investing it,” she said. “Yeah, I just tell that story as like a PSA. If you are investing in a Roth IRA, please, please make sure that eventually, you go back and you choose stock options for that money, or else it’s just going to be sitting and it’s not really going to be invested in the market.”

The video has received more than 295,700 views and numerous comments from people who thanked Jonae for the tip or shared their own experiences with Fidelity’s Roth IRA.

“Ooo thank you thank you because I just opened a IRA account last week and didn't know I needed to go back into it,” one commenter said.

“I switched to ‘Fidelity Go’ for my ROTH IRA so I won’t file under the pressure of choosing stocks lol,” a second remarked.

“Idk why they don’t tell you this more clearly. happened to me too,” another user shared.

As one commenter said, "This is so common, that once you said ROTH IRA I knew what the mistake was. Glad she caught it on time and not when she was retiring."

The Daily Dot reached out to Dominique Jonae and Fidelity via email for comment.

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