My first IRA was a rollover with Vanguard. I still have the account today, and it’s a perfect way to invest retirement funds in low cost mutual funds. Sometimes, however, you want to invest a portion of your retirement into something a little more exciting. One option for those looking beyond mutual funds is Lending Club.
Lending Club is a person to person (P2P) bank. It brings together those looking to borrow money with those looking to lend money. In Lending Club’s words, it “is an online financial community that brings together creditworthy borrowers and savvy investors so that both can benefit financially. We replace the high cost and complexity of bank lending with a faster, smarter way to borrow and invest.” Recently, Lending Club introduced IRA accounts to its lineup.
I’ve invested in Lending Club notes for a couple of years, although not in an IRA account. Although my net annualized return thus far is 7.67%, the average return according to Lending Club is 9.5%:
For its IRA accounts, Lending Club compares its returns to the S&P 500, Fidelity Megellan Fund (FMAGX), and the Schwab Target 2040 Retirement fund (SWERX). According to LendingClub, a $100,000 investment on June 1, 2007 would have outperformed these other investment options through June 26, 2010:
Of course, past performance can’t tell us how investments will perform in the future. In addition, the risk profiles of these investments are different. But the comparison is still noteworthy.
If you are considering a LendingClub IRA, there are two things you need to know. First, they offer just about every type of IRA account: 401(k) rollovers, transfers from other IRA accounts, Traditional IRA, Roth IRA, SEP IRA, or Simple IRA. Second, while the IRA account charges no fees, there are minimum balances you must maintain or a $100 annual fee will be assessed. Here’s Lending Club’s disclosure on fees:
To qualify for a no-fee IRA you must have an initial minimum balance of $5,000 or more in Lending Club Notes and maintain this 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.
If you’d like to learn more about LendingClub’s IRA accounts, visit LendingClub’s Individual Retirement Accounts website.
Published or updated June 7, 2011.