I have contributed toward a Roth IRA which I purchased through Merrill Lynch for 2 years and would like to know how I would go about putting this years $2000 contribution in a fund only offered by ETRADE. Would I have to take my money out of Merrill's account and move it into ETRADE, or can I have part of my Roth IRA with Merrill and part with others? Would I just buy the fund I want through ETRADE and that contribution be recognized toward my Roth?

Multiple custodians are legal. Reasons against: extra recordkeeping, fractured $$ may make it harder to buy a block of stock, and possible more annual fees. Etrade does not charge an annual fee for IRAs, most banks and brokerages do unless your total assets are significant.

If you choose, you can have custodian #2 request all assets to be directly transfered from custodian #1. This is the preferred way to move accounts: direct transfer. No taxes witheld and you preserve you future option to move the account (in the same year) if you have problems with the service.