Can I have two IRA's? One of each type?
Posted 08 March 1999 - 06:13 PM
Would appreciate any comments.
Posted 09 March 1999 - 11:09 AM
Isn't it great the options we have!?!?!?!
Posted 10 March 1999 - 02:42 AM
Posted 10 March 1999 - 04:49 PM
Posted 26 March 1999 - 11:12 PM
Posted 26 March 1999 - 11:25 PM
Posted 30 March 1999 - 12:13 AM
- If one did not make a contribution to a regular IRA in 1998,is it required to
file a form 8606 even though the IRA
- If one has instead opened Roth IRA
in 1998, is there a form similar to
the 8606 that must be filed?
- The instructions do not address these
-Thanks for any help.
Posted 30 March 1999 - 02:47 AM
A person doesn't need to have two or more Roth IRAs to invest the money in two or more different mutual funds. One account can consist of as many different funds as you like. You can at any time contact the custodian/trustee of the Roth IRA and ask for the assets to be allocated differently within the same account. Bear in mind that some mutual funds have minimum requirements, so you might not be able to spread a total of $2,000 across six different mutual funds if the minimum is $1,000 per fund.
So for 1998, just send a check to the custodian of your existing Roth IRA(s) and tell them which mutual funds you want to purchase with your 1998 contributions. Give them a call first if you like to make sure you get the procedure right (if they want forms filled), since April 14 is almost upon us and you don't want to screw up at the last minute.
Where it is important to have two different Roth IRAs is if you have a Roth resulting from the conversion of a traditional IRA, and then want to start contributing to a Roth. Because the sources of the assets are different, you don't want these assets mingled since the tax and withdrawal provisions will differ, especially during the first five years. Both of these can, of course, consist of as many mutual funds as you like.
There are restrictions on withdrawals from Roth IRAs during the first five years, with certain exceptions. Conversion IRAs and contributory IRAs are treated somewhat differently. Your contributions to a contributory IRA can be deducted without penalty at any time (first in, first out). It's the interest, dividends and capital gains that are taxed during the restricted period. Thereafter it's all tax-free.
Early withdrawals from conversion Roths are penalized -- I guess because there's no way of knowing which part was a "contribution" and which part was "growth", so first in first out doesn't apply.
Posted 30 March 1999 - 06:40 PM
You asked if you needed to file a 8606 in the 1998 tax return? No, not if you didn't actually make a contribution, or a distribution out of your regular IRA accounts.
And secondly, you asked if you made a Roth contribution, would there be any form like the 8606 to file. Nope... (not for a contribution, you'd use the 8606 if you converted or recharacterized amounts into a Roth however)
Posted 05 April 1999 - 06:39 PM
It is important to note that if you hire a trustee/custodian to handle your self-directed IRA, then you can often direct them to invest your IRA assets in almost anything. However, if you open an IRA at a particular mutual fund family, chances are they will act as custodian over only their investment options. Having one trustee of a self-directed IRA consolidates all your accounts and minimizes paperwork but can sometimes cost more in fees than opening an IRA at a specific financial organization with their investments only and then opening a different IRA with another one next year... Sometimes the choice boils down to $$$$$ or extra paper.
Also, it is no longer necessary or helpful to keep your Roth contributions separate from your Roth conversions. The ordering rules state that all of your Roth IRAs are treated as one, the first money withdrawn is your own contributions, the next from conversions and then finally from earnings. Your own contributions always come out tax free (no so with a traditional IRA). The conversion dollars come out tax free but subject to a penalty if withdrawn within 5 years of their conversion and you don't meet any of the exceptions to the penalties (59 1/2, disability, first-time home, education, etc...). Finally, earnings withdrawn before both 5 years and 59 1/2 are subject to tax and possibly penalties. If I contribute $2,000 to Roth IRA 1 and convert $5,000 to Roth IRA 2. Then I take a distribution of $1,000 from Roth IRA 2, it is treated as a return of my own contribution, even though it came from a conversion account. No need to keep them separate any more.
Posted 05 April 1999 - 11:26 PM
I did recently discover that one no longer needs to keep conversion and contributory accounts separate, and in fact directed someone (in another post) to an online article on that very subject.
As for the extra paperwork versus extra dollars, I agree with you that working with more than one mutual fund family can complicate things. In fact I intend to stay within the same fund family for that very reason. Until I know a heck of a lot more about investing, and have a heck of a lot more dollars to spread around, and have a heck of a lot more time to play the market, I plan to keep things simple. Meanwhile life goes on ...
Posted 06 April 1999 - 04:46 PM