John G

I think I agree with the above reply. Let me say it a little differently and add 2 caveates. You don't get to cherry pick the most favorable assets to convert. All IRA assets (regardless of custodian or location) are pooled for each spouse in doing the calculations. The pooling determines the percent of all IRA assets that were tax dedubtible contributions vs non-deductible vs earnings. The caveates: 1. Conversions are a complicate issue - both in terms of evaluating if they are "wise" and knowing that you are following the regs. Time to hire an accountant or tax professional to evaluate you idea and help you figure out what works best. 2. Do not assume that the 2010 relaxed conversion rules will stand unchanged. There are many tax oddities right now - gaps and other strange flip flops. In this area, I do expect Congress will act.

Congress can change the rules at any time and the Roth rules have already been changed. BUT... it is highly unlikely that Congress will attempt to tax Roths directly for the following reasons: 1. Millions of folks own Roths and they vote. 2. A change would be a major renege and invite a popular revolt against the elected. 3. Grandfather option is easier - just change rules for future. I agree that the US must strive to keep its financial affairs in balance. We can't just deficit spend or over promise on social security or other entitlements.

We aim to be helpful. Post again if you have other questions.

You contribute cash to a Roth. I believe you will not find a custodian that will allow you to buy something from yourself - there are many issues and the potential for serious abuse related to "self dealing". If this door was left open, folks could sell discounted privately held Sub S shares to a Roth and then arrange a company sale that would jack up the value of those shares. That would be essentially an end run around the 4K contribution ceiling. If you can't buy something in the open marketplace - on a major exchange - you can't buy it for a Roth or IRA.

Woops missed that point. One more aspect of a Roth is that you can always take out contributions without penalty and without tax impact. No five year wait on a contributory Roth. But... that's not the point... taking out money prematurely erases the tax shelter value. But this removal of Roth contributions at anytime feature does mean that your Roth can act in some way as a safety net - a no penalty source of funds in a pinch. A standard IRA carries a 10% early withdrawal penalty, plus everything is taxed as ordinary income.

Based upon the facts you provided, it looks like you are correct. You can fund both your IRA or Roth based upon your earned income. Your spouse does not need any earned income. However, both of you may or may not qualify based upon total income and/or filing status type issues. Once you determine you qualify, you can put your contributions (or your spouses) into any IRA or Roth account that you choose. Be sure to designate which tax year is the basis for the contribution - you could contribute 8,000 in January, but it might be 4000 for last year and 4000 for '07. You do not need a special "spousal qualified" IRA or Roth. I believe this spousal option was developed to give 1 worker households the same retirement planning options as two worker households. The spousal earnings option has been around for a number of years. Note, there is a bump up in max contribution if you are age 50+. Watch each year to determine the max amounts. I expect the 4K to be ramped higher.

Creating and IRA then converting in a subsequent deal is a completely legal two step process as long as you meet the various qualifications. For example, you meet the income threshold and filing status in the year of conversion. If you have the same marginal tax rate in year 1 and year 2, then there is essentially no advantage. In fact, if your investments moved up a lot in year 1, you would be taxed for more dollars being converted in year 2. However, if your income in one year throws you into a higher tax bracket, the very crudely calculated advantage would be delta taxes (difference between the high and lower rate) applied to $8,000. Why "crude"... because it also depends upon state taxes (they can change, your residence might change), changes in federal tax rates, change in IRA assets over the year, etc. I think you said that your boosted income barely throws you in the next bracket. Then you potential savings from the two step approach is the percent difference between the two brackets multiplied by the amount of dollars above the bracket step. If you only went 2,000 over the bracket and your tax rate delta was 13%, your savings would be around $260. If you applied a 13% delta to the full $8,000, then your savings might reach $940. Work your own numbers to determine if a two step is cost effective and worth the time/effort.

Joel, lets not make some universal statement that ALL target funds are great. I have no idea what you mean when you say its what "commissioned sales people have been doing for years". Commissioned sales people have been mostly selling loaded (commissioned) products - often biasing their recommendations towards products that produce the highest commissions, rather than those that might best serve their clients. IRA owners still need to read the details: like annual expense percent, what is the underlying mix of funds, custodial fees, etc. The target packages vary between fund families. Even at the best and most competitive mutual fund families, you pay a slight premium for simplicity. Perhaps that annual expense rate might have been 0.18 percent and now become 0.25. It is difficult to determine if you face expenses layered on top of expenses. When "Target Fund" becomes some kind of mantra, then some operators are going to create products that have higher fees. Think of the products that banks market based upon safety or convenience - they rarely coincide with "best buy" products. There is nothing magical about target funds. A fund family defines a specific Target product based upon an assumed retirement year. Then they define a cluster of perhaps 6 funds and set a beginning mix. As the years pass, the fund adjusts the percent mix. While this is very convenient to the beginner, anyone with a few years of Roth contributions could take their 20,000 and divided it amongst similiar funds. Joel, you may like the simplicity or convenience. I raise the cautionary flag - don't buy anything that you don't understand. While this message board focuses mostly on IRA/Roth rules and administrative issues, we still get a lot of war stories about folks who got caught in bad situations. Loaded funds, annuities, surrender or exit charges, high expenses, poor performance... or some combination of these, either by there own choice or because of recommendations of an "advisor".

I understand the importance of getting started, and with so many choices, a tax payer first addressing fund selection may just feel awful. Minimal info, too many unknowns. What I want to emphasize that you don't buy the pitch without reading what is inside the deal. Many messages at this site have the theme "I didn't understand what I was buying"... with loaded funds, advisors, annuities, high expenses, exit charges, and various schemes. Vanguard is a good company. They try to keep costs ultra low in many of their funds. You can usually switch funds in a fund family with a couple of exceptions: funds don't like frequent switches (like 90 day) and some fund choices may be closed to new investors. Vanguard has a number of index funds representing the S&P500 and total market. These would also be good choices to get started. The Vanguard 2035 is 90% stocks right now, and has a 0.2% expense ratio. The main holdings include a whole stock market index fund (70%), Euro fund (10%), Bonds (10%), Pacific fund (5%)... and misc + cash. Not a bad mix... but you can eventually do this yourself and control the shifts over time.

Car loan math: "The balance was originally $22,499, (now $20,452) the term is 72 months, and we're only 11 months into it, and the rate is (hold your stomach) 12.65%." I think you said 200 rather than $2000 in principal payments that appear to have been made. My trust HP 12C calculator says your payments should be $442.84 per month if 22.499 financed, 72 months at 12.65 percent. That's close to your monthly payment, but it should not be off more than a penny. So, I suspect you have something like "insurance" or other fudge factor in there. Did you get this at a dealership? If yes, that may have contributed to your high loan cost. Dealer loan rates are generally not as competitive as a bank or credit union. I have trouble believing that you would get this rate if you shopped four loan sources. I know this doesn't apply to you, but there are folks going to the "Bank of Mom" and offering 2% over her current CD rate (something like 6.5%) - both sides do better. Maybe you are paying the price for a low credit score, but I haven't heard of an auto loan over 10% in years. If you had gotten a bad rate at 9.4%, you would have reduced your payment by about $50 per month. If this was the best deal you could have arranged, leasing a car might have been better. But frankly, given the financial shape you portrayed, I would have opted for a five year old vehicle with about 80K miles. I bought a clean full size Pontiac from an FBI agent who was leaving the country for 5K (a very good price) last summer, and that car will be used by someone in our family for another 6+ years. You didn't say if this is a new car, or something special because of your one child... but I would not have committed to $5,400 a year - more than 12 percent of your income to any car. In that price range, some folks would just not buy collision, another way to cut down on expenses. I am not walking in your shoes, but from this vantage point, I would have opted for a less expensive vehicle. Refinancing: First problem is does your car loan have a prepayment penalty? Second problem, it looks like even with a very low percent rate, you will have trouble getting you car payment below $400 per month. Do you really save $9000 if you pay off the loan now? Not exactly. There is an "opportunity cost", the value of having the cash working for you. Let's say that instead of burning $20,452 to retire the loan that you instead put it in a conservative bond/stock fund and earn 6% each year. At the end of 6 years, you would have $29,011 to offset the interest paid out or about a gain of $8,559. I make not attempt to examine the tax liability/deductibility of this example, this is not a symetric set of solutions since the loan is fixed but the earnings of the investment are variable. I just do the math to say that what you could do with the cash offsets against the interest on the loan. Some scenarios could be more favorable to you then what I have used as an example.

Clarification: car loans are structured in many ways. Some use the "Rule of 78". This approach is so consumer ugly that both Congress and some states have outlawed it for many loans. But, if that is the type of loan you have, then interest is heavily loaded into earlier payments. If you want to learn more about this try this website: http://www.bankrate.com/brm/news/auto/20010827a.asp You need to look at your loan papers and specifically get a printout of the interest and principal schedule. Another thing to look for is any prepayment clause. You did not specify payment amount, size of loan, or duration. My response was therefore generic and I thought it prudent to alert about how some auto loans are structured.

I have posted before about the benefits and drawbacks of "target" funds. Vanguard is a great group, most noted for their low expense. But, target funds are basically a marketing gimic, designed to sell "no need to do a lot of thinking" or as Popeil likes to get the audience to say "set it and forget it". You may do just fine in selecting a target fund - but don't assume that their assumptions about timing and shifting of investments best matches your needs. Worse yet, if you buy into this concept that you don't need to pay attention to your investments. You do. How much time have you spent reading the prospectus? What is the collection of funds used by this fund of funds? What are the expenses? What are the expenses of the sub-funds? What are their primary focus? Are they actively managed or index style funds? [i know the answers to these questions. The critical issue is do you?] You can find more comments on "2035" or perhaps "target" fund by searching on that keyword. See this link: http://benefitslink.com/boards/index.php?s...274&hl=2035

Facts are not clear. Did the customer give the custodian written instructions to convert and IRA to a Roth? How do you go from "contemplating" to a conversion done? Did the customer subsequently give any written notice that they were not eligible to convert? When, if ever, did the custodian become aware that the customer was ineligible? Did the customer ever get any documents indicating a Roth conversion? If so, why did they not respond and correct what they thought was an error? How much money is involved? If we are talking a minor amount of money, I think the IRS will be more forgiving and allow an after the fact correction... but I have no case studies or PLRs to justify that view. I can't tell from what you said how this process occured and what was known at what time. Clearly, the customer had an obligation to pay attention to the paperwork and correct anything that went wrong.

In Maryland, home info is likely to be readily available at town hall, library or on line. You might also have some fun using: www.Zillow.com This site is about 1 year old. It attempts to give you an estimate of individual homes, based upon statistical analysis. In areas with large tracts of similiar homes that also have extensive electronic data, the estimates can be helpful. But homes in rural areas, or in states or counties that don't provide access to electronic data can be way off. You can see areas by address or zip code. You can select an arial photo as the base or simple drawings. Put your cursor on any home and Zillow tells you when it last sold and the price. Zillow automatically makes the selection of a comparable home set to do statistical analysis on a property. But, you can also hand pick you comps based upon your local knowledge. This website is far from perfect and accuracy ranges from almost to not close. But, I think Zillow represents a pioneering way to giving the public access to key housing sales data. You are right to be wary of a more experienced homeowner. Don't forget to be wary of real estate agents as well... they sometimes forget to tell you things and urge you to bid more to get a sale and their commission. I doubt you will find any agent willing to work with you for less than 2.5% of the sale price... so its not likely to be just 1 or 2 grand.

You really can buy and sell real estate without agents! Really. Bought 1 house, sold 3 houses that way. We tend to buy houses keeping in mind the street traffic that goes by might be important when selling. Eg. no cull de sacs. Try your library for materials on buying homes. Home ownership is first and most importantly for you shelter. The primary reason it tends (not guarenteed) to be a good investment is because you are leveraged about 8:1 or 9:1. That means the sales price climbs, but you only invested a fraction of that price. 300K home with 30 down - house climbs in four years to 330. Your 30K equity has grown to 60K. That's very simplistic... no property taxes, utilities, maintenance, but also no rent flowing out, and I did not show the value of a tax deduction for interest paid. There are a few folks on the west slope of Colorado Rockies that bought homes during the oil shale hayday... it didn't work for them, because Exxon shut down the only industry. But... like I said, no guarentees. It just works a lot more than it doesn't.

Yes, you might be stretching a lot to buy a home. And, folks on the edge often get taken advantage by predatory mortgage companies. Do an online search for option ARMs and you will see some of the horror stories. If the guy delisted, and is no longer with a brokerage, you might be able to approach him as a FISBO (for sale by owner). That won't work if you registered ever with his real estate agent. That puts another 6% of the purchase price into the negotiation. Hey, and how about a nice three bedroom ranch on 1.5 acres with barn down in St Mary's county! Recently remodeled! I warned my daughter she was buying into a possible housing bubble. After 16 months, they both took new jobs.... oh, the lessons you learn when you are young. And in this case, I was a co-conspirator.

I am always amazed what comes out of Pandora's box when someone puts up multiple posts. Oh my wayward assumptions! (I assumed you never owned a home) And, sometimes you regret your advice because of your incomplete understanding. New topics to cover..... College financials: Colleges vary in how they do family financials. Carnegie Mellon, for example, does not count home equity.... none. Well to be more accurate, they didn't four years ago when my daughters boyfriend applied and his single mom had 425K in home equity but only 10k in all other assets. He got a four year full scholarship. It is not possible to tell you what rules will be in effect when you children start applying, but basic cash always looks more "accessible" than retirement accounts or home equity. Therefore, if you decide to buy a home and put 40K into it and another 16K in IRA/Roths, you will not be showing a low of accessible cash. Your income and dependents will mean that your children will receive substantial financial aide if you play the game right. The more expensive the school, the bigger the financial support. At more expensive schools, more of the support will be in the form of grants, compared to college loans or work/study at public universities. For many years, Princeton had a "calculator" on their website. I used a family with 40k in assets, 65K income, 2+2 family size, kid with 3K in savings, etc. as an example for one of my JA classes at an inner high school. Result: kid puts up 3k (probably assuming a summer job), parents put up 3K, and Princeton puts up the other 33K as a grant. As one student said, "its cheaper to go to Princeton than the city branch of University of Colorado". He might have also added, "I wish I had gotten the grades to get accepted to Princeton"... but that's another story. Homeownership Yes, there are regional housing bubbles. Too many houses for sale, not enough buyers. Some areas have over a 1.5 year inventory of houses on the market. This means that many homes will not sell and prices will be coming down. In the mid-1980s, Colorado Springs had such a glut. I remember two houses, side by side, same builder, both 5 years old, same size (3400 sq ft, 2 car garages, etc.) were on the market. One seller a divorcing man who had to pay his wife all of the gain. The other a couple wanting to move to a retirement condo. One priced at $220K and the other at $164K... I leave it to you to figure out which was which! Neither sold for 6 months. Neither had any offers as well. This was around the time when we were looking for a home and made three different offers on other properties that were 50k below the asking price. One said yes. The other two houses sold below what we offered later in the year. What does this long story suggest for you? Well, maybe you should go bargain hunting. There may be some folks in your city who absolutely have to sell. You could make some very low offers and find out you now own a home. Since you have cash and nothing to sell, real estate agents will work with you. But... you will need to be very hard nosed about prices. In a bubble, sticker price means nothing. What they paid for their house means nothing. You say there are homes in the 300s... well maybe one of those can be bought for 240K. The agent must present your offer. If this all sounds harsh, keep it mind "it's not personal, just business". My daughter has been trying to sell her first house in Maryland and in 6 months has not received even a low ball offer. She's on the other end of the bubble. Generally, you do not want to own the icest, biggest or most expensive house on the street. One strategy is to find a house that needs an update but has potential. If you can swing a hammer or swish a brush, you can capture increased value by putting your labor into projects. Hope all this helps. You have added some good "color" to this message board. Best wishes.

Good questions... and yes, beyond the scope of this site. I won't give you a comprehensive answer but will add a few ideas: 1. Do NOT pay off a car loan early. The interest on these loans is front loaded, so when you pay off the note early, your effective interest rate is actually higher. Talk to a friendly banker if you wish to confirm this. You also would not pay off early low rate education loans (not your situatio), but should pay off all high interest rate credit card debt (sounds like that was already done). 2. IRS debt: you may want to see if the IRS would be willing to accept an immediate payment of the full amount owed, but ask that they waive the penalty. They just might say yes. It sounds like you had family circumstances that put a strain on you, rather than you just spent a load on silly things. 3. Fund either your Roth or IRA for last year. Then fund for 2007 as soon as possible. Each of you have a 4 K max as long as your combined earned income is over 8 K. You might be able to do 4+4 for a number of years by just drawing down upon #8 below. 4. Fund your husbands 401K to the max to get the 50% match. That match is equivilent to what most folks would earn on their investments over 4+ years. You get it immediately and it gives your account a significant boost. 5. You do not appear to have a cash reserve. I would take between 10 and 20K and put it into a separate money market account or perhaps laddered (staggered overlapping dates) CDs. You can find rates in the 3.5 to 5% for your reserves. This is the fund you go to when you run into a financial crunch such as unexpected medical expense or car accident. 6. You don't mention insurance. I would highly recommend that you buy simple term insurance (not universal or whole life) which is the cheapest protection in case one of your dies while you have kids. You are probably only going to keep this insurance active until the kids are around 18, unless your husbands pay is your sole source of support. This might cost about $130 to $250 per year if you are non-smokers in good health, which would get you a 100 K policy. Ideally, you should have perhaps 250+ K in insurance on your husband, but think about a basic policy at a minimum. He may have 1x or 2x salary at work, but that is rarely enough. Do be aware that the insurance industry will try to steer you to all sorts of products - you only what a basic term policy. 7. Consider taking a very modest amount of the total an doing something for the family. A vacation, sports equipment, TV, stereo.... It is tough to make a lot of financial decisions that have no "fun" attached. IRAs, IRS, insurance... think of something positive. Given you frugal ways, perhaps some camping equipment. 8. After your put funds into your IRA or Roths, pay off the IRS, enjoy a little bit of fun, set aside a cash reserve, you should have perhaps 50K to put to work. I would suggest sending this money to the same company that will handle your IRA or Roths... which will allow you to show enough household assets to have no annual custodian fee. Be sure to ask about this with each custodian you are considering. Then I would divide these assets between three mutual funds. For example, you might want to choose a total market or S&P500 index fund, an income or bond fund, and something in a small cap or growth fund. The line up would then look something like this: Debts Paid + Fun Money (10k) Roth/IRAs (16) Cash reserve or safety net (20) Core index type fund (20) Bond or income type fund (15) Growth or small cap (15) I very much appreciate you honesty in posting your circumstances. I grew up in a family that bought everything on sale and out of season. We had a crude cabin for a summer vacation - and did not miss the TV. My folks clipped coupons and tried to repair their own cars and appliances. We didn't hire vendors to paint the house or tend the yard. I believe it is completely appropriate to live within your means. One final thought - while you don't sound like are inclined to buy a home, over the long haul, homeownership can be both satisfying and another way to build for the future. Most folks 10% down on their first home rather than 20% you mentioned. Yes, you have maintenance, property taxes, utilities, etc. But, over the long haul, homeownership is a financial plus for many people. I would suggest that you talk with some of your friends that own homes and get their view points. If you change your mind, you will have a couple of investment accounts that can cover the downpayment.

I hope this initial look into retirement investing will get you started on either a Roth or an IRA. Tilt to Roth if you tax rate in the future will be much higher. But, given you circumstances, taking a tax credit now make some sense. It is sad that no one in our government is willing to stand up and say that "you are in charge" of you fincial future. SS is a very minor safety net, and it probably will just keep you above the poverty line. You choice is spend now vs spend in the future. Yes, it is hard to get started, but if you can begin any kind of systematic plan, you are better off then just crossing your fingers. If you choose an stock based mutual fund, your 8k should double about every 7 years. That means that you should be able to build about 100,000 fund by your late 60s. This will provide about a 5,000 supplement each year to what you might get from SS or pensions. If you make additional contributions, that nest egg can grow much larger. Some folks take a short term second job just to fund that retirement account. Retirement account assets are often not counted in family resources when kids apply for financial aide for college. If you keep your inheritance in taxable accounts, it will get counted. Best wishes.

"It will take 13 years at 9.5 % to "blow by" $ 10 K. Getting started is hard. " I assumed that you were starting a systematic program of investing for a Child rather than just an initial amount. If you could put in $2k per year, you would "blow by" in about 4 years. If you just wait for the first contribution to grow to 10K, then it will take a lot longer. Beg is the wrong term. You are a valued new customer - and customers ask for service. A few decades ago everything was full service brokers and commission sales mutual funds... and don't even ask about minimum initial deposits. The trend has been faster, quicker, increased choice, lower fees, more efficiency (Fidelity used to be the single largest buyer of postage! With email notifications, I suspect their costs have dropped a lot.), better information, etc. When I am considering developing a new relationship (car dealer, bank, broker, or fund family) I expect the company to work for me, or I take my business elsewhere. Frankly, the financial industry is a lot more like commodity then some elegant/boutique service. The companies that don't change wither and upstarts blossom. A lot of folks don't remember when Charles Schwab pioneered the discount brokerage, or when Bogel invented the index fund. There is no reason to "resent" a relationship either, if it doesn't work, just more on. Or as Donald Trump might say, "nothing personal, it's just business". The IRA annual fee at Schwab is absolutely NOT $50. I made two different calls and got the same number $20, and my local rep would absolutely waive the fee to get a new account. I didn't ask if that meant every year or just the first.

It sounds like your IRA may be in some kind of "sheltered" environment where choices are restricted. I don't know this firm, so I would recommend calling them and find out how to do what you want, or if you need to change the nature of your account. If you are talking about a company plan of some kind, they may have decided to restrict the types of choices for administrative reasons.

IWV is the ETF equivalent of a Russell 3000 index fund, which covers the 3,000 largest US equities. 3K of anything is considerable diversification... but you get no small cap or international component with this ETF. ETFs are exchange traded funds - I am not sure why you say you only have "few" selections to choose from. As TD Ameritrade is a discount broker, I would assume that you have access to all ETFs. Am I missing something? You might want to consider adding and international or small cap or growth component to you portfolio. For the next ten years you will be accumulating you base Roth assets. During this initial period, have a small cluster (3-5 components) is all you need. You can choose index fund, ETF or attractive no-load low expense funds. Frankly, you could also do just fine being 100% Russell 3000 especially if you are willing to rise exactly with the US market. The IWV/Russell3k represents 90+% of the USA total market capitalization. If you have the financial capacity to fully fund the 4K max on a Roth in January, I would recommend that you go ahead and do this. It maximizes the time the money is inside your Roth tax shelter. Once the money is inside, you can put it all to work immediately or in steps. The monthly contribution approach is called "dollar cost averaging" and offers two main advantages: (1) the contribution "hit" is spread over the year, and (2) you "buy" more shares when the market is lower and fewer when the market is high. If you already have $8,000 in your Roths, and continue to put in the max amount (which will bump up) each year for 30 more years and achieve about a 10+% annual rate of return, you should build up a 1+ million dollar Roth account by age 69. Even more if you have a spouse doing the same. You could then start pulling $40,000 to 50,000 dollars out each year. Note this amount will not have the buying power of 40-50k today. However, you will be adding Social Security, a pension and other investments income. Think of this as you rough plan. Do continue with your non-Roth investments. Assume that Congress will change the max amounts and the types of programs, so you may have other options to consider in future years.

You paint a complex picture. I am not sure I understand the details, and those details will drive the answer to your question. The 22k was IRA money - did you take it as a lump or will you be getting it spread out over years? I am also not sure if this is considered taxable income or gift. It is also not clear if you already took the cash in 2006, or if it has not yet gotten to you. It also sounded like you might be receiving additional funds from the estate when it settles. If you have not received the IRA, the tax issue jumps to 2007, not 2006. The accountants who post here might be able to assist on your circumstances. The second part - roths vs IRAS: Part of the emphasis on Roths stems from the expectation that many folks will amass substantial retirement funds, and likely be in higher tax brackets, even in retirement. It sounds like that may not be true for you. If you are likely to stay in the lower brackets, then go ahead and take the deduction, even if it is only a small percent. The trade off is between tax free distributions much later (ROTH) and possible tax deductions now (IRA).

This message is not an endorsement of any brokerage, just an example of how to solve you dimema. I confirmed today that Charles Schwab does allow custodial Roth IRA accounts for kids - but, hey, didn't we already know that? The minimum to open an account is apparently $2,500 but I was advised by a supervisor that as in many things at Schwab, the local branch rep has the authority to make some exceptions (no further information was provide about the basis for an exception but other business with Schwab and/or automatic payment plan come to mind). The annual custodial fee at Chuck's place is $20 each December, but is erased when household assets at Schwab (this or any other account) exceed $10,000. I know that some reps will waive this if you just ask! Schwab has about 20 index funds with no transaction fees or loads. They have "thousands" of non-index no load no transaction fee accounts. Surely, there is something that will give you reasonable results. A plan: Option 1: Talk with your local Schwab office in person and see if they will reduce the minimum. Option 2: Take the $850 for 2006 and add $1650 for 2007 and presto chango you have the $2,500 minimum for starting at Schwab. Select an index fund or any other no load no transaction fund and continue for a few years. At some point you will blow by the $10k (or they may reduce it) and no longer have an annual custodian fee. Or, transfer other household assets and get their sooner. Remember, I am not proposing a life time arrangement, but rather just something to get you started. A few years from now you can transfer the assets anywhere you want. Don't obsess over the annual expense percent or the annual custodian fees. The performance of your selected fund is much more important. I wonder if you think that having ultra low expenses guarentees you the best return? Nope. It doesn't work that way. Someone who owned a portfolio of the Dow industrials made over 16% in 2006. The often touted S&P500 was about 3% lower than that, and the Nazdaq was more than 6% lower than the DOW. That was 2006, no one can tell you who will win the horse race in 2007. Lets look another way at performance and expenses. Those clever folks who had money in Office Building REITS last year suffered terribly from annual expenses of 0.80 to 1.25% and some were even in loaded REIT funds... but don't cry for them, that sector was up 45% according to an industry association report that just hit my email. I don't know who you talked with a Fidelity or if you were looking at their website, but you apparently missed this info: The Fidelity SimpleStartSM IRA offers an easy way to start investing in a Roth or Traditional IRA and may help you stay on track for retirement. A SimpleStart IRA can be established with as little as $200 through automatic monthly contributions, and you avoid the $2,500 initial investment on most Fidelity funds (FundsNetwork® funds not eligible). I think if you make a few more phone calls or try some of the options above, you will be able to cobble together some kind of plan that will work. You might also talk to a couple of local banks... they won't have the best of index/mutual funds, but they may be more lenient about miminums and ages. You have set up some reasonable requirements, but you may find it all exactly as your want.

Good post papogi. I concur. Fidelity is the only major firm I can think of that has online discount brokerage AND a mutual fund family. Perhaps a few discount brokerages (Schwab is an example) have added a token number of mutual funds (like the Schwab 1000) to their account options. Further clarifications: As noted above, you can either eliminate or minimize annual custodian charges and transaction fees. You can completely avoid fund commissions by never buying a LOADED fund. But, the story does not end there. You still have imbedded annual expenses within the fund. These are published in the prospectus and can be found on "report cards" or "fund profiles" on Yahoo Finance, the fund family websites, and through the online brokerages. The range of annual expenses runs from around 0.10% for a few index (also some "Admiral" or "Spartan") funds to around 2.5% for very specialized niche, sector, or international funds. Caveate emptor! What is the impact of imbedded annual expenses? This comes right off the top. Your annual performance is reduced by these expenses. While its nice to be at the low end, sometimes I find a fund has been a great performer or has a style (small cap, value, sector, country specific) that I hope will do well in the coming year. If the annual expenses are way under the average for this class of fund (another statistic often shown is industry avg expense percent for the type of fund)... typically under 1%, I will consider the fund. Beginners should be selecting a broad based NO LOAD fund that has below average expenses. Since this fund will hold dozens or even hundreds of equities (aka stocks), the novice Roth owner gets substantial diversification right out of the shute. The simplest way to do this is to start with an INDEX fund, a fund that uses a computer to buy stocks from a list (like the Standard and Poors 500 larger firms) with ultra low annual expenses. But, there are also plenty of good general purpose funds that will also work. The goal is not to pick "THE BEST" fund, that's an impossible task. You don't even need to select a fund in the top 10%, again an impossible task. The idea is to get on base every year, by bunt, single or double. Forget the homeruns... you will reach your long term goals if you consistently get reasonable results. Shaselai: I like the web reference, but asking beginners if you have more than 50k or 500k is a problem. The seven questions seem more aimed at brokerages rather than mutual funds. I don't think anyone at this site should be promoting a specific stock or fund. Partly because it is impossible to predict which funds will do best next year, and chasing historic performance can suck you into buying high only to see market sentiment move away from that funds style. The picking part is your job. However, if you have a specific question, email me and I will try to answer it, time permitting.