dh003i

Glad we could help you, and glad that you decided not to invest in an index-annuity.

mbozek, I agree that we should plan, based on our best estimates so-far. What I'm saying is that the all-invasive state causes a highly present-oriented society. What do you mean when you say the USSC won't "permit" something? What are they going to do? Throw their pens and legal briefs at soldiers under the President's command? The USSC has no enforcing power. They make decisions. It is the job of the President to enforce them. If the President doesn't do that, there's nothing the USSC can do. See Andrew Jackson on John Marshall: "John Marshall has made his decision. Now let him enforce it." Regarding gold confiscating, you are wrong and confused. What The Gold Confiscation Of April 5, 1933 did was make it criminal to hoard gold. Originally, dollars were redeemable in gold. A dollar was a claim to a fixed amount of gold. So, part of what this law did is allowed banks and the government to avoid paying up their obligations to people. People got worthless inflation-prone pieces of paper; the government got gold. The act mandated that people turn in their gold (except for a few relatively insignificant exceptions): "hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States". The penalties for violating the prohibition were severe, emphasis added: The order mandated that people get pieces of paper in exchange for a real asset: In other words, real property is confiscated, and in return, you're given worthless inflation-prone pieces of paper. Arguably unconstitutional. That's like taking my house and saying, "oh, we're giving you this paper-clip for 'just compensation'". "[N]or shall private property be taken for public use, without just compensation." The only way to tell whether compensation is "just" is to allow the person to voluntarily keep or exchange the property. Summarily, the US Constitution is dead letter, which ir routinely violated and ignored. Also, regarding the income tax, you are incorrect to say that the 16th Amendment was only needed to tax property. See The Origin of the Income Tax: I won't get into the lengthy debate about whether or not the income is in fact valid, whether the 16th was properly ratified, whether the IRS has the power to enforce, or any of that other stuff. Unsurprisingly, the various hands of the goverment always tend to make the rulings that favor the government the most, and not those that favor the people. It is unsurprising that judges rule against various challenges to our tax-structure: for if those challenges succeeded, it undermines the stability of their very salary. PS: Regarding the claim that taxes don't go up under Republicans, that is incorrrect. If you look at government spending, it is actually much larger under Republican Presidencie than Democrat Presidencies. National debt, government spending, inflation, and even taxes are usually hiring when Republicans are in office.

pax, In some states, the accumulation of gold/silver (buying it) is taxed at the sales tax (this is what I mean by consumption tax), even though by the Constitution, gold and silver are money (thus, their acquisition shouldn't be taxed any more than changing 100 $1's for a $100). Furthermore, appreciation is also taxed, despite the fact that (again, as money), it shouldn't be taxed anymore than should increase in the value of the dollars. Taxing gold and silver is the State's way to make sure that you can't completely protect yourself from inflation. mzbozek, My point is that uncertainty about the future -- taxes, inflation, national debt, confiscation -- leads to higher time-preferences and a more present-oriented society than otherwise would exist: that is, more immediate gratification and consumption, and less savings and investment. There is nothing preventing Congress from changing income-tax law on a retroactive basis as well. They did in SS. Who knows what "crisis" in the future will make it another "exception", so that maybe they'll decide to tax Roth IRA withdrawals. What's stopping them from doing that? The Constitution, a piece of paper? In the end, all that matters -- constitutional or not -- is that they have the power to do whatever they want. Simply because in the past, in most cases, they didn't enact retroactive changes, doesn't mean that they won't or can't in the future. The Constitution didn't stop Abraham Lincoln from suspending habeas corpus, or engaging in numerous other rights violations. It didn't stop FDR from confiscating gold. Who knows what's next? You can point to the past and note that it is unlikely, but it is still a feasible possibility.

I agree that tax subsidies are a big factor, however, there's a few thing you're not considering in the above-quoted text. Taxes on your income decrease the incentive for working in the first place (it is clearly obvious that if the tax-rate were 100%, no-one would work unless coerced to do so). Thus, taxes on income decrease savings, consumption, and investment. In short, they discourage work-ethic. The relevant thing to consider regarding savings vs. consumption is the taxes on consumption vs. those on savings. Typically, consumption taxes are less than 10%; however, interest earned (from savings) is taxed at the income-tax bracket. Gold and silver are unconstitutionally taxed at the income-tax bracket. Taxes on long-term capital gains are, I believe, 15%. Taxes on consumption also reduce savings, because people are also taxed on consumption after they've saved money for a period of years. The person saving money knows that he will be taxed both on the growth of that money, and on his eventual consumption of it. Indeed, because the overall trend of taxes is always up and never down, he may worry that consumption taxes will be higher in the future when he decides to spend the money than they are now. This leads to great uncertainy regarding the future, which makes people more likely to spend everything here and now. The much-vaunted Roth IRA's have this -- and other -- problems. (1) At any time, the government can decide, "nope, we're going to tax you on distributions from a Roth". They did it to social-security income, what stops them from doing it in a Roth? (2) The consumption tax may very well be higher when they take their distributions than it is now. The 401(k) and 403(b) fall prey to even more uncertainty, having the same uncertainties as the Roth, and one additional uncertainty: (3) The uncertainty of income-taxes when distributions are taken. Income-taxes could very well -- most likely will be -- higher when the money is taken out than now. There's also uncertainty about whether one's tax-bracket will be higher now than when one retires. Now, I'm not saying that one shouldn't invest in Roth's or 401(k)s. I'm just saying that uncertainty -- taxes, inflation, government debt, confiscation, etc -- causes time-preferences to be higher, ceteris paribus: that is, it causes the time-discounting of the future to be greater, thus savings and investment to be lower, ceteris paribus. As a historical note, the taxes on gold and silver are unconstitutional because the Constitution deigns them money. Then again, income taxes in-and-of-themselves were unconstitutional -- and struck down by the courts -- by the original constitution. An Amendment had to be passed. As said earlier, the universal trend of taxes is up. Our founding father's rebelled because the British put a tax on tea. They wouldn't recognize our present system of government.

I have two nieces. I used " nieces' " to refer to the fact that the money would be for my nieces, hence would be their's.

joel, A little bit nosy indeed. They do have parents, however, there's no way that their parents (nor any parents that aren't very well off or wealthy) alone can fund all of college at a good university. I don't have a significant other -- really, don't have time for one at the moment -- and am not planning on, nor do I want to have, children. However, should I have children in the future, this is beneficial to me, as I can change the beneficiary, thus will have had a longer time for asset-buildup and compounding.

Sorry about that. A long time ago, I created another account, for some reason which I forget. On one computer in the lab, it logs in automatically under that one; when I realized that, I deleted that post, and reposted the same thing under this user-name (which is the one I use). I've got to e-mail BenefitsLink and ask them to delete the anarchocap account. I apologize for the confusion.

That's kind of what I would figure off-hand. If you're going to be investing in something, you invest in it because you think its a winner. If you think you need someone to cover down-years, you don't have confidence in your investment. We must remember however that past results are no guarantee of future results. Simply because the stock-market returned 10% over the past decades -- with most of the gain concentrated -- doesn't mean that it will continue to do that over the next decades. I have a very pessimistic outlook the future of the stock-market, due to concerns about inflation and hyperinflation; Warren Buffet expects much less impressiver returns in the future than we've had, also. Now, does the index-annuity "protected against downside" hold up any better under a hyperinflationary environment in which the stock-market will be in disarray and stocks will do poorly? No. In a severe economic storm, it will be impossible for these insurance companies to cover your downside. For one thing, the market will be doing so poorly that it'll make it impossible for them to cover your downside; for another, they won't be making enough money to make good on their guarantee. Insurance companies can only make good on their claims if they have the money to do so. There is no such thing as an absolute guarantee. Really, what you get in these kinds of annuities is a reasonable assurance that in an economic environment that is overall healty, the insurance companies will cover the down years; they can do this because of the profits they've taken from the up-years. However, in an economic environment that is overall bad, it will be impossible for them to cover your down years.

Thank you everyone for your responses. I'd like to apologize for not giving much background information, which may have led to alot of heresay and back-and-forth. Some background... I'm 23, and am maxing out Roth IRA contributions and 403(b) contributions. Right now, the 403(b) is split between Fidelity Low Priced Stock and New Markets Income. I plan on moving what's in New Markets Income into an International investment fund (either Diversified International, East-Asia, maybe some Canada). My Roth IRA is currently split between Select Electronics and Fidelity Low Priced Stock. My next move in my Roth IRA will be into Tocqueville Gold, and I may move Select Electronics into a long position in Select Energy. I'm going to be establishing either a Self Employed 401K (Keogh) or a SEP IRA with Fidelity, and may be contributing a significant amount to that (I expect to make an extra 12-18K a year as an independent contractor). My invesments in these will be in hard assets and mtual funds investing in companies that deal with hard assets (gold, silver, oil, water, etc). Because of my outlook on the future, I'd like to have some degree of control over what my money is invested in. A guaranteed return is meaningless if dollars are devalued to worthlessness. So far, regarding the possibilities for helping my nieces out in college, here's what seems to be available... Question regarding 529's: if I setup an account on my older nieces' behalf, and it is not completely needed, can I transfer the remainder to my younger nieces' account without penalty? From Fidelity.com Insurance with low death benefit, high cash value Have to admit, I'm a little bit confused about doing this. I'm 23 years old, and don't plan on dying anytime soon, certainly not before my nieces are in college. Why should I bet on my own death? These kinds of things don't really seem to be insurance, but insurance bundled with savings. Insurance is essentially grouping of risks -- among equal-risk people, or weighted for risk -- into a money-pool. The death-benefit part of these plans is that, but the cash-value part of the plan isn't insurance. It's been combined with insurance for tax-benefits. Since my greatest concern as an investor is a likely coming inflation (or even hyperinflation), having investments that can offer some protection from inflation -- and hedge against it -- is important. A guaranteed return of 4% can become meaningless really fast. There's no limit to how much money can be devalued. Do any of these insurance plans offer investment options that stack up well against inflation, such as various hard assets? Would any such cash-basis insurance policies offer me control over what the money's invested in? I seem to have some vague recollection that for it to get the tax-benefits of insurance, the policy holder can't control the investment. 529 Plans Earnings grow tax-deferred and qualified distributions are federal income tax-free, EXCEPT, my nieces will not be in college by 2010. After 2010, unless the Economic Growth and Tax Relief Reconciliation Act of 2001 is extended, distributions will be taxed at the income tax bracket. $55K per Beneficiary in a single year. Beneficiary can be change. I maintain control over asset-distribution. Contributions not limited by my income. No age limit for beneficiary. Low impact on financial aid; account is considered my asset, thus financial aid calculations only consider 5% of it. Choice of portfolios managed by professional fund managers. Coverdall Education Savings Account Earnings grow tax-deferred and qualified distributions are federal income tax-free. $2,000 annual account contribution limit. Beneficiary can be changed. I maintain control over distribution of assets. Restrictions based on income: Phase out AGI over $95K (single) or 190K (joint) filers. Beneficiary must be under 18 years old. Low impact on financial aid; account is considered my asset, thus financial aid calculations only consider 5% of it. I can choose what account is to be invested in: mutual funds and individual securities, including stocks and bonds (as available through the sponsoring institution). Roth IRA I am contributing the max to my Roth IRA. However, I'm funding my Roth for retirement, not for education expenses. Furthermore, 4,000 a year for 10-13 years is only going to put a small dent in college expenses 13 years from now -- furthermore, it wll have to pay for both my nieces. (I say 4k a year, because your contributions, but not earnings, can be taken out tax-free). Thus, I don't think this is the way to go. What's wrong with Coverdall's, at least for the first 2k a year? I have more complete conrol over the investment options there, and they're not uncertain beyond 2010 with regards to tax-free withdrawals, like 529's are. It seems to me like I'd only contribute to a 529 after I'd maxed out Coverdall IRA conribs. Any opinions?

most talk about "deflation" is quackery. When does the government ever stop printing out money? Almost never. And they certainly never burn some of the money they tax. No, the only "deflation" that ever occurs is a negation of a previous inflation via fractional reserve. When banks get money, they can loan it out at a reserve of 1:10. This pyramiding creates a credit expansion (inflation). In essence it is fraud. The banks are loaning out money which they don't own to other people, and are still claiming to the depositers that they can redeem. And FDIC doesn't fix it, as you can't insure an industry that is always insolvent (incapable of paying its claims). All FDIC is is taxpayer subsidization of this pyramiding system. Now, when someone demand their money back, what happens is that this 1:10 pyramiding reverses. To clarify, when $1 is put into the banking system, they can create $10 of credit out of thin air (1:10 pyramiding). And when $1 is taken out, they have to call back $10 (because of the 10% reserve requirement). Various people have written on this, including Murray Rothbard and Alan Greenspan. By the way, social security is not savings. Nor are 401ks, or Roth IRAs, or anything else where you're money isn't in currency. Buying stocks, bonds, real-estate, is not saving, but investing. Keeping your money in a currency -- Euros, Dollars, Yens, gold, silver -- is savings. Now, I see the logic in considering investment farsighted, and for some purposes calling it "savings". But social security is most certainly not savings. The SS system is a pay-as-you-go pyramiding system, and there is no social security savings fund. All there is is the government "loaning out" the money it taxes from SS to itself, which it then "promises" to pay back later. This is an accounting fiction. All of the so-called SS "savings" are spent. Now, I think you can look at the statistics almost any way you want, you're not going to find that this nation is very future-oriented. Very present-oriented. Everyday experience confirms this as well. As people move into higher income groups, their spending increases faster than their savings. People in high-income groups still have enormous amounts of debt. Curing credit-card debt problems is a billion-dollar business. Time-preference is enormously high. Which is why the wedge that the creation of money and credit (inflation) has created between time-preferences and interest-rates is so harmful: it causes enormous accumulations of malinvestments (boom), which culminate in the realization that these projects aren't profitable and can't be completed (bust and reallocation of resources). I think that alot of people here might not see this. Many here are probably in frequent contact with the financial elite: the financially responsible. Financially irresponsible people don't consult with experts, like the people on these forums. Why would they? They don't think far enough ahead.

I wouldn't attribute it to the President. I'd attribute it to inflation, which lowers the value of savings (after all, why really save if your money can be made worthless at any moment), extremely high tax-rates, and other government policies that interfere with the free-market and promote very high time-preferences for the present over the future.

Just an interesting note. According to the latest news I've heard, the average national savings rate is actually zero or negative (which means that people have an enormous amount of debt). This is really unbelievable. Don't people realize they're consuming their capital and that such can't continue forever?

I have two nieces, the oldest of whom is 7. I'd like to look into some ways to put away some money for their college education. Are there some plans that I can do this with, which won't penalize my nieces when it comes time to apply for financial aid?

Great! Thanks for the helpful info. Now I can plan accordingly (namely, if I need to use the money in my retirement accounts, I'll use my 403b money last, to possibly avoid being taxed on it at all).

I'm very closely involved with a non-profit institute, which has charity status by the IRS (contribs to it are tax-deductible). Is there a way to get the money from a 403(b) contributed to these organizations upon my (distant future) death free of the income-taxes that normally occur when you do withdrawals?

I've talked to the benefits department of my employer several times about HSA's. However, nothing seems to be happening. Right now, my employer provides the typical low-deductible health insurance coverage (which isn't really even insurance, but pre-paid healthcare). Can I obtain an Health Savings Account and the special high-deductible insurance plan separate from my employer? Or does the fact that my employer provides insurance prevent me from doing this? If so, do I have any legal options to ask them not to pay for this, so that I can open an HSA? I really think that -- even if I had to pay for a high-deductible health-insurance policy -- the savings account option from a Health Savings Account would ultimately be greatly to my benefit, both in terms of saving money and accumulating money. Particularly so since I am young and in good health.

mbozek, Thanks for the information. Obviously, from what you said, incorporation isn't worth it. Regarding my status as an independent contractor, I will be able to write for other journals, but I don't plan on doing such (writing two 6-page articles per month will probably be as much as I can do, and that's not enough to submit to multiple journals). Thanks for the copyright suggestion; I'll have to ask the editor about that. I've looked into the possible retirement plans, and it looks like a SEP is my best option, because it allows me to contribute more net money to retirement. I talked with a Fidelity rep, and he said that if I do a SIMPLE, the amount of my contribution to the SIMPLE plus the amoutn of my contribution to my current 403(b) can't exceed $13k a year. However, if I do a SEP, I can contribute 25% of my income as an independent contractor, and that will stack on top of a $13k 403(b) and $4k Roth IRA contribution. I then also have the nice option to roll the SEP over into a Roth IRA, allowing tax-free growth.

thanks for the information; I've looked around a little bit. I've read a little bit about self-incorporation. Does anyone have any links on that, and when it would be a good time to do that? It seems like I can get some favorable tax-treatment by doing that. PS: I'm the same person as anarchocap. For some reason, I made another account, and was automatically signed into that account from my computer when posting the original comment.

andyandy, I'm sure your mom does have your best interests at heart; however, I would have to strongly disagree (and I suspect that most other posters here, such as John G., appleby, and mbozek would agree, based on past posts). Short answer: Absolutely not! Why? Reason 1: Most annuities allow tax-deferred growth (you can't take a deduction on the contrib, and the money is taxed at normal income tax brackets when you take it out). You should never place one tax-advantaged investment inside of a tax-advantaged plan. When you do that, you're wasting the benefit of the tax-advantage! You gain nothing by investing in something that's Reason 2: Nothing in this world is free. Annuities have to go through some fancy hoops to be considered "insurance", thus get tax-deferred growth. They have to provide some kind of a "death benefit". For this, you are charged some kind of mortality fee (which is a percentage). This adds on top of the normal expense ratio, making these more expensive to hold. The result is that your net return is lowered. Reason 3: You shouldn't be against yourself. If you're going to be paying someone money so that they will cover the downsides of your investments, and limit your own potential upside, what you're really saying is that you don't have confidence in your own investment. In that case, you shouldn't be invested in whatever it is you don't have confidence in. Reason 4: Retirement plans are long-term deals. You should be in this thing for 40, 50 years. Thus, you should not be particularly concerned with yearly fluctuations. If you are concerned about the stability of your portfolio, you should diversify among things that have little or no correlation to one-another: stocks, bonds, precious metals, and real-estate, for example, are things that do not correlate much with eachother. Annuities should not be something you bother with, unless you've maxed out other retirement options (401ks, 403bs, Roth IRA's). Only then should you consider them. And you should be considering them as separate from (an in addition to, not in replacement of) the better retirement plans. There is one particularly useful function an annuity serves: when you retire, you can invest in an annuity where you make one contribution, and then they pay you a fixed amount of money (preferrably indexed for inflation) every year for the rest of your life. You can use this to allow yourself to obtain a baseline standard of living. If you live to 120, you got the good end of the bargain (money-wise); if you die 1 year after you get this annuity, the company you bought it from got the good end of the bargain (money-wise). For yourself, you have to consider if the security you'd be purchasing would be worth the possible price.

If your initial contribution was more than $1,000, then you can close it and take a tax-deduction. However, if your initial contribution was, say, $500, and it grew to $3,000 then shrunk to $1,000, you can't. However, you should not close your RothIRA. Once you take out the $1,000, that's it, it can't go back in (you can contribute $4,000 to opening a new Roth, but you still can't get back that $1,000). So, I wouldn't recommend closing your RothIRA. Firstly, you haven't said what mutual funds or companies were in it. If it is mutual funds, which ones? If companies, then you shouldn't sell just because you have lost money. If you would still buy those companies today -- based on detailed analysis of their financial situation (value) and quality (growth) prospects -- at their current prices, then you should not sell. The fact that you lost money is irrelevant to the decision you should make now. The decision you should make now should be looked at in the following light: You have $1,000 to invest. Just looking forward, where do you think the best place to put it is? This requires research into the companies and/or macro-economic conditions (if you putting it in various sectors). Do you think that these companies/mutual funds that you have your money in have a good prospect of producing significant average gains over the years between now and when you retire? I'm not particularly bullish on tech-stocks right now, though I do have an electronics mutual fund. Over the past year, I've lost about 20% on it. Yet, I'm not selling it. Why? For a few reasons. Because I'm not particularly concerned with the short-run, but with the long-run. I'm considering how well I think it's going to do over the next 50 years. The other reason is I want to maintain a position in the fund. It's a small part of my overall portfolio. Another example, right now, what I am bullish on is commodities (particularly gold); I'm always enthusiastic about gold, because it is something that's solid -- no-one ever went broke putting their money in gold, it's been a store of wealth for thousands of years; however, now, I think that gold itself, collectors coins, and gold companies are undervalued and have significant growth prospects. Yet, they've went down in the past year, and many are now jumping the boat. The point isn't that you should or shouldn't invest in technology, electronics, or gold, but simply that you have to do your research and maintain a long-run view. Neither I nor anyone else can do your work for you, nor should you accept the conclusions of anyone else without doing your own research. You can't be hopping ship constantly, and you can't give up on saving and investing. The problem with chasing the performers is that by the time you recognize a performer, it's probably at or near it's peak, and is significantly over-valued, which means you're in for a downfall. Another thing you have to remember is that saving and investing are not the same thing. Investing is a form of consuming. You are buying something -- a stock, a bond, a mutual fund, a piece of real-estate, whatever. There is no guarantee that investments will always go up. There is no guarantee that the stockmarket will continue to go up on average of 8-10% a year (in fact, I'd argue that the days of that are over). There is no guarantee that bonds are always going to go up, or that you're always going to get paid (companies, and yes even governments, can and do go bankrupt and default; and oftentimes, when governments pay back their bonds, they do it by simply printing out money, which decreases the value). Real-estate, I think over the long run, is going to have an upward trend, because it is a strictly limited hard asset -- the ratio of people to land is always going to be getting higher. But that doesn't mean that real-estate can't become tremendously over-valued, nor that your specific investments or REITs are going to do well. Furthermore, it isn't even true that land is stricly fixed: for we can increase the surface area by reshaping the land-scape, and we can erect higher buildings (effectively creating more real-estate). I'd also like to make a note regarding "inflation-indexe" bonds (I-bonds): they don't protect you from inflation. Firstly, they're indexed against the CPI, not against the money-supply (which is what inflation really is, increases in the money supply, while higher prices are just an effect of inflation). The CPI is heavily managed to make it seem like there really isn't inflation, so even if your money grows in proportion to the CPI's increases, you're not going to maintain your purchasing power; you certainly won't keep up with inflation, because increasing consumer-prices are only one effect of inflation, not inflation itself. Secondly, profits on I-Bonds are eventually taxed at the income-tax rate: so any hope of even keeping up with the CPI is doomed. Third, the government can default on it's loans at any time. When you look at the way they deal with these kinds of thing, there are only 4 ways: taking more debt to pay off existing debt, increasing taxes, increasing the rate of inflation, or simply defaulting. Now, with regards to saving, that is a different thing. Saving simply means saving the money you make. The form in which you keep your money is up to you. I have my obvious preference: I prefer not to place my trust in a currency which can be printed out and devalued without limit, so I prefer that my money be kept in gold, rather than dollars. However, some people would like to have a mix, or all dollars. Again, you have to make these decisions for yourself, with the help of competent professionals if you think you need it. Never-the-less, the point is that investment is not the same as savings. The distinction can be understood in the following way: when you invest your money, you can lose all of it. Companies can be managed poorly, or can be fraudulent, or can simply become obsolete. However, money that you place in savings -- either fiat-currency or gold -- cannot have such occur to it. Gold can't be Enronized. Neither can dollars (although they can be devalued without limit by the government, such that in 10 years it may cost $20 to drink a cup of coffee). That said, you should not be using your retirement plans (or anything else tax-favored) for savings, but rather for investment. Savings should not be placed in tax-favored plans.

I should have qualified that statement, and referred specifically to the funds I was talking about. Most of the funds I would consider investing in from Vanguard have 10K limits (energy, precious metals come to mind). Fidelity has a nice option with Roth IRA accounts where the account holder now doesn't have to meet the minimum, as long as (s)he makes regular contributions ($200 a month). As far as I know, Vanguard doesn't have such an option (though I expect that they will soon create such an option, to better compete for the low-income customer base). It is true, though, that most Vanguard funds do not have large initial investment requirements. It is true that both companies have hundreds of funds; however, more choice (at less cost) is always better. There are various search-tools to help investors find the funds that are right for them, as well as representatives from the companies.

Yep, the free market sure is wonderful. Though Fidelity hasn't quite caught up with Vanguard in the low-cost area yet (although they have other strengths that make them very competitive with anyone). Unfortunately, Vanguard and Fidelity don't play nice. Both companies have a funds network, but neither is in the other's "no transaction fee" segment; so, if you buy a Vanguard fund through Fidelity, there's an $75 fee (whereas if you buy a no-transaction-fee fund through Fidelity, there's no such fee). One area where I think Vanguard is lacking a little bit in some areas is appealing to individuals with lower contribution limits. Many don't want to plop down a $10K investment in a mutual fund as the minimum initial investment.

You can look on the IRS' website or just Google for it. To get MAGI, you start out with your AGI, and then add back various things (unfortunately).

All of the money that you contribute to a 401K or 403B is deducted from your AGI. Thus, you may be able to help yourself meet the RothIRA limit by contributing the max to these plans. Between you and your wife each contributing 13k to your 401K's or 403B's, that's be a 26K reduction in your combined AGI. It is true that a 401K or 403B may end up being unfavorable compared to investing outside of a retirement plans and being taxed at the lower capital gains rates, especially when you consider that it is very difficult to imagine income taxes not increasing in the future. However, one trump factor in these plans is employer matching: if your employer matches your contributions up to a certain point, you have to at least contribute enough to a 401K or 403B to max out those matching contributions. That's free money. Typically, you'll get an automatic 25% or 50% return on your investment; some employers even match 1:1, so that's a 100% return on your investment. Alternatively, some employers contribute to your 401K or 403B no matter what you do. My current employer automatically contributes a dollar amount equivalent to 6.5% of my salary to my 403B, whether I contribute anything or not. Also note that the contribution limits for RothIRA's will be increased to $4,000/year for 2005, 2006, and 2007. In 2008 and beyond, they go up to $5,000/year, with increases in $500 increments, adjusting for the CPI. So, over 3 years, you would contribute $12,000 to a RothIRA; if both you and your wife contribute to your own separate Roth's, that would be $24,000. You may greatly benefit from the Lifetime Savings Account and the Retirement Savings Accounts that are currently being considered in legislation, if they pass; you can contact your Representative about the matter.

Adding a little bit to what previous posters have said. Regarding investing in individual stocks, it takes considerable time and research. If you want superior results, you have to engage in superior research/work from a position of superior knowledge. You also have to be willing to resist the latest thing (currently, REITs are pretty hot stuff, even though the real-estate market is in an enormous bubble). I suggest books by Graham and Dodd and Philip Fisher as a basis for how to find good companies. You should also remember that the 10% assumption is just that: an assumption. There's no law saying that the stock market has to go up 10% each year (in fact, without inflation, the stock market as a whole would rarely have such increases in "value"). And you have to consider the effects of "inflation". Because of this, as I'll explain, I'd recommend considering keeping some portion of your portfolio in precious metals (gold, silver). If rapid inflation occurs, or if hyperinflation occurs, if a great depression occurs, etc, the value of the dollar (and other forms of fiat-money) will plummet, and the stock-market will crash. However, gold and silver have retained their value for thousands of years through the worst disasters. When John says inflation, he's probably talking about the CPI, like most people are when they think of inflation. However, the CPI is heavily managed, and really only measures one result of inflation (as classically defined): increases in consumer-prices. Another result of inflation is increases in producer-prices, and increases in the stock-market. Without inflation (the increasing of the monetary supply, by printing out money) the price of all goods would tend to decline over time. Most of the time, when you hear about inflation, what you're really hearing about is the results of inflation; a better measure of inflation is the money supply. To see the effects of inflation, consider the fact that a nickel would buy a large lunch 50 years ago; today, there isn't anything I can think of that you can get for a nickel. On the contrary, in the 1920s, an ounce of gold bought a nice suite, and today it still does. Thus, aside from thinking about investing aggressively, you should also be thinking about preserving the value of your wealth. Gold is real money that never depreciates over the long-run in value. Dollar bills always do. You should also remember that saving money and investing money are not the same thing. Investment is a form of consumption. You are using your money to buy a stock, bond, mutual fund, REIT, etc hoping that the value of that will increase. However, it is no-longer "money" that you own -- but a stock, bond, mutual fund, REIT, etc. Of course, over the past 20 years or so, leaving your money in cash would have resulted in it depreciating in value due to inflation, while investing would have allowed it to better keep up with inflation; but again, there's no law of economics that says the stock market, bond market, or real-estate market has to go up. Gold and silver are not without risks, though they do hold their value over the long run. These precious metals are highly volatile in the short-run, and there is much interference from Central Banks (which often take measures to try to artificially keep the price of gold low). Furthermore, precisely because of the wealth-preserving power of these metals, there are other risks: confiscation. In 1933, FDR ordered that all gold (aside from collectors coins) be confiscated from citizens. Leaving aside potential constitutional arguments against this, it is obvious that if such could happen in 1933, it can happen again in the future. Nor are collector's coins immune: simply because FDR didn't have them confiscated doesn't mean that they aren't confiscateable. Collectors coins are not a normal investment in gold, and are valued significantly above their gold-weight. Collector's coins, however, have been an interestingly impressive investment vehicle since 1970 (since 1970, the CU3000 has averaged 9.6% a year, while the Dow has averaged 8%), and the economics of it suggests they'll continue to be so (because there is never going to be an increase in the supply of a coin minted in 1876). Collector's coins enjoy tax-deferred status, so when their value increases, you owe nothing (until and if you sell them). Investing in collector's coins is also a skill (just like investing in the stock-market), and unless one knows the field, one should not do it (just as with stocks, there are also professionals to handle this). PS: Because of the tax-advantage that rare-investment coins enjoy, they should never be bought within a retirement plan. They already appreciate in value tax-deferred. This is just an application of a rule: you don't place tax-favored investments inside of tax-favored retirement plans, because you're wasting the tax-advantage of the retirement plan.