John G

There is NO penalty on the distribution of converted amount if the account has "vintaged" five years. See the reference posted by Appleby. But... the best answer is solve the problem some other way and leave your tax shelter Roth alone.

One of the goals of this message board is getting the facts straight. Other goals are to avoid touting specific vendors and to sidestep off topic issues like politics/religion. The following: "I have even heard that Hillary has stated in past speeches of instituting a special tax of the now taxfree Roth withdrawals" strikes me as inuendo. I was curious enough about your comment to spend some time Googling all things Hillary related to tax policy. I visited her website, the DLC, Bloomburg News, "On the Issues", CNN transcripts, NY Times interviews, and various reputable sources. My findings: tax policy is not a driving issue for Senator Clinton, and I found not a single reference to Roths or IRAs. In about 90 minutes, I found no comments about a "special tax" on Roth withdrawals. "I have even heard" is insufficient basis for posting material. We have enough trouble keeping track of legislation, private letter rulings and tax court rulings. My accountant likes to remind me that there is a considerable body of court rulings on "basis" that would favor a continuation of the Roth tax status. The number of Roth account holders are in the multiple millions, a there would be a major rebellion against Congress if they reneged. Sort of a safety in numbers concept. I conclude that a direct assault on Roths is unlikely. If changes were proposed, I believe existing accounts would be grandfathered.

2010 is 3+ years away or two Congressional elections and one Presidential election. I would not base long term plans the rules will not change one or more times by then.

AC: good additional material on factoring in the RMDs in the post 70.5 period. I think you are suggesting that the future tax rate of this tax payer is relevant. I am not sure that is correct. I would be more interested in how many grandchildren might be involved, their likely ages when the Roth would pass to them and their income tax rates. (working this out does get complicated and involves a lot of predictions about future events so the likely accuracy of a single scenario is pretty low) I question how you can convert much of this IRA at low tax rates. I think this persons issues are significantly more complicated than yours due to the size of the IRA. All that said - lets look at a simple conversion scenario. First, let's assume that this tax payer is not taking anything out of the IRA (missing fact from the original post) and that via a mix of stocks, bonds and funds that the IRA performance will be around 8%. That means that the without withdrawals, the IRA will increase by about $320,000 in the coming year. We don't know what the baseline income would be "if controlled", but it sure sounds like this tax payer would need to manipulate his income to stay under 100K to qualify for a Roth conversion. Someone with 4M in IRA assets probably has a significant baseline of taxable interest, dividends and SSN (only SS is mentioned in the post). No mention of a pension. We can rule out zero income. I am guessing closer to 100k is more likely. If the original author wanted to convert "just the gain" on the account and you had a controlled base income of 100k, you would have taxable income in the year of the conversion based upon $420,000.... for state and federal income taxes. As one of our TV chefs would say.... BAM. The marginal federal tax rate for income over $168,275 in 2006 is 35%.... and that does not include the impact of Sched A and personal exemption phase outs. I can't difinitively answer the question, but I just don't see how you can convert much of this IRA at low tax rates. Some clarifying questions for the original author: 1. Are you taking anything out of the 4M IRA now? 2. In coming years, what would be the "controlled" income if you wanted to convert? 3. Based upon the practical limitations of controlling your income, how many years might you be able to keep income under 100k? (if you wanted to do a multi-step conversion) 4. What is a reasonable expected return on your IRA investments... or what is the percent mix for stocks, bonds and cash/moneymarket? 5. Are you married filing joint returns? 6. How many grandchildren are beneficiaries and what is the range of their ages? 7. What is your age? 8. Does your health or family history give you a sense for how long you might live? 9. Do you expect to take voluntary distributions out of this IRA during your expected lifetime? 10. Would you take the minimum amount out after age 70.5? I want to return to the point I made in my first post. Roth conversion planning is complicated. You need to consider a number of scenarios and many offsetting factors. Before I would take any action, I involve my tax advisor and perhaps estate planning lawyer in a series of discussions. Don't shy away from spending the money for your "consultants" - they will give you contrary views of the future, try to quantify the benefits, suggest how rules changes might benefit your plans, and generally keep "Murphy" far away.

There is no off the cuff response to your question. I can think of some scenarios where conversion might make sense and a lot of scenarios where it would not. {This comes from someone who did big conversions in 1998, and while it worked out for me, it was not the slam dunk that I had expected. My accountant raised a number of concerns that helped me frame my decision.} The details are very important: your tax rate now, ages of grandchildren, their tax rates, your state income tax (better to convert in a no income tax state), you income needs from the IRA, your expected lifetime, etc. You need a model that incorporates the key parameters so you can evaluate a range of scenarios. Your proposal can not be evaluated by back of the envelope number crunching. You need to run this by your tax advisor, in part because there are so many details that are important, but to also give you a contrary view of the value of your options. I would not do massive income manipulation to qualify for a conversion. But, if with minor controls over timing (shifting 4th qtr to the new year) you could meet the income qualifications, you might want to a partial conversion. Note, that as the converted amount moves up, you would eventually bump up in tax bracket. A partial conversion often provides significant benefits and would be less costly. Note, there have been proposals to eliminate or modify the income threshold for conversions in future years. Here are two more things your should consider: (1) if your grand children are employed and/or have earned income - help fund their own Roths, and (2) consider the generation skipping tax provisions realted to estates where you can leave up to 1 million to each grandchild and not trigger estate taxes (of course estate tax thesholds are moving around). I don't recall if generation skipping provisions apply to IRAs. Again, there is no simple answer to your question. You need someone familiiar with your facts to help you walk through some scenarios.

This is sad, but not surprising. Folks get twisted over money all the time, and often over modest amounts of money. I am not a lawyer, but I think that you will be upheld as the legal spouse and the IRA beneficiary decision will hold. One very important piece of information is that your former husband did not change the benefitiary designation on his IRA. He apparently had plenty of time and the process is not hard. A death bed will disinheriting you has no impact on the beneficiary designation. Because there is a conflict and second document, I doubt the custodian will take any action until they get a court ruling. I wonder how the children might react if your health insurance company starting threating his estate with all of the medical bills! If their arguement of legal separation prevails, then your insurance company could seek repayment. If the insurance company came after you, then you would of course file against the estate. You need a good attorney, one that actively defends your position. However, you may also want to consider getting all parties to submit to arbitration. A substantial portion of the estate could get ground up by attorney fees and court costs. Again, I am not a lawyer. Please post again.

Before you cash out any of your Roth, you should look at different institutions for alternative financing or re-financing. The 10 year bond rate has dropped almost 1/2 point since May 2006, and this is often what financial houses are using for setting loan rates. As of Oct 2006, interest rates are LOWER for most loans than this past spring. You give no details other than to say high rate equity loan. Higher than your margin rate on stocks? Higher than a complete refinance? I can find some banks that are giving signature lines of credit at 7%. So, I would make some phone calls before touching the Roth.

If you are considering any kind of conversion, you need to get advice from your accountant or tax professional because much is based upon your specific details and the tax laws have changed and will change again. It's not simple. There are issues that arise due to income eligibility and filing status. Your tax advisor may also point out that you could be overstating the potential advantages of a conversion. And there well may be a change in Congress, so don't count on 2010 rules holding for another four years. Sometimes these gaps (such as with the inheritance rules) are left open to be addressed later. The reason you can't selectively move just part of your IRA assets is because Congress decided against letting you "cherry pick". You can read about this in Publication 590, and also at the website below. Essentially, you "combine" all of your IRA assets as if the holdings were in one location. Then you do a conversion based upon the percent or ratios related to non-deductable vs deductable contributions. http://fairmark.com/rothira/conseq.htm

More info on annuities can be found in the Jane Bryant Quinn article, page 55 of the Sept 11 Newsweek titled "Cracking open the nest egg". For the ambitous, you can do annuity shopping at www.annuityshopper.com and with info on age, gender and deposit amount find out what you would get. Lets look at one example: couple age 55, $500,000 to purchase an immediate annuity. Here is the result: $2,562 per month, guarenteed for life. If you don't get the income stream, your spouse will. If not the surviving spouse, then the next beneficiary until 20 years have passed. A 6.15% annual return on the annuity, but the principal goes POOF. I have five stocks in my portfolio that have dividend yields over 6%. There are bonds that pay more than 6%. It is just not that hard to design a portfolio of stocks, bonds and mutual funds to support a 6.15% payout stream where there is enough of a growth component to provide some inflation protection. This annuity looks like a crappy option to me. Read the Quinn article for some scary examples of hidden fees and convoluted annuity language.

Only the earnings on a Roth would be taxed when withdrawn for an education purpose. Contributions would not get taxed. Since this is a recent account, and you indicated it was small, then I would expect most of the total is original contributions. (The original Roth contributions can always be withdrawn without any supporting reason and not get taxed.) Second point - annual fees. There are many places where you can start a Roth or transfer a Roth and avoid annual fees. Last time I checked, Etrade would waive the fees if you elect email reporting systems. I was at Schwab yesterday asking about my daughters first job 401K and was told that Schwab now waives fees on any IRA/Roth over $3,500. I asked if this was due to general competitive pressures and the branch manager said "absolutely". Competition and the efficiency of internet transactions is driving down the cost of all fees and commissions. Those forces are just as powerful as genetics and evolution. You did not indicate the dollar amounts of the two accounts or the general capabilities of the family to pay for education expenses. Perhaps you should leave the Roth as a long term tax shelter for your child and use the 529 for college expenses. Think of the Roth as part of your childs education about investing and planning for the future. That dinky fee should look pretty small compared to the first textbook you kid buys, and there are ways to shrink and reduce that fee.

The list of allowed expenses is narrower than all expenses you might incur. A 529 is clearly not a direct college expense and I have never seen it on any list. I am baffled by this question. Why would you want to flip from a Roth tax shelter to a 529? Can you please explain your reasoning?

Good points on immmediate vs delayed types - I should have covered it. I think when you know more about alternatives (laddering bonds, bond fund, dividend paying stocks, growth and income mutual funds, etc.) annuities look less attractive annuities. Like many insurance products, they are sold heavily based upon a combination of fear and guarentees.

I am not an expert on annuities, but I will offer my quick take. Annuities are blend products: a mix of insurance, investment, and guarentees. These are complicated products, and the insurance industry likes to keep them that way so you will rely heavily on the sales person. Expenses and fees are often over 2% a year - which is way too high. A sales person may steer you towards a package that gives him a nice commission rather than be best suited for you. Annuities may not keep up with inflation. You may purchase from a company that is sound today but is weaker many years down the road. There are often surrender fees if you change your mind in less than 7 years. Distribibutions are treated as ordinary income, not taxed at the lower capital gains and qualified dividends rates. Many annuities have stiff surrender fees, especially if you change your mind in the first 7 years. You are penalized for withdrawals before age 59 1/2. In my experience, many people who buy annuities do not understand what they own. Products with guarentees tend to offer lower performance because they appeal to folks who want certainty and may not understand longer term risks of inflation. Locked up, high fee, surrender charges, possible lower performance.... hey, what's not to like! Frankly, a reasonably educated investor can accomplish much of the same features by direct investing in bonds, dividend playing stocks and mutual funds. There are some positives: - no limit on contributions - tax deferred compounding - guarenteed income stream (perhaps suitable for someone who can't manage there finances) - some options for variable annuities to address the inflation concern

This is a rudementary issue that all financial advisors should know. I concur with the others, start looking for another financial advisor? Is this some kind or rookie in a big house? Perhaps some of our FAs and tax advisors can post info on how to find a good financial advisor. I rely heavily upon my network of friends when I need to find expertise in any area. I am wary of anyone that leads off with acronym credentials that rarely are correlated with substance or quality. I've worked on the premise that I am the key person for basic facts (Google sure helps) and that my accountant should be an expert on the more arcane tax rules. I recognize that not everyone is comfortable relying on their own abilities, or has the time devote to the many elements of investing and taxes. It is extremely difficult to hire a financial advisor when your own personal knowledge is skimpy.

This is one of the great misleading myths of stock investing. Take all the weeks over a 20 year period and sorted them in terms of percent change in the stock market. Now look what would happen if you "missed" the top 20 weeks.... or top 10% of the days using days as the basis. Of course you would miss out on a lot. But, those top weeks did not occur back to back. The exagerated impact of this myth represents results if you got out of stocks just before each short burst up. Great example, valid issue, but very misleading about the actual impact of not being in the market for brief periods. I think this is a favorite myth of the brokerage business. Myth busted? Maybe, but there is an element of truth that gets lost in the myth. The real issue is not "missing" the top weeks or days, but the problem in predicting when you should be IN or OUT. I have about 25+ years of experience with investing. I have never met anyone who regularly predicts swings or turning points in stocks, interest rates, bonds or the economy. There are just too many variables, too many unpredictable events. Katrina and WTC terrorism are just some of the unpredictable events of the last 5 years. You can add elections, war, political upheavals and just the ebb and flow of any market economy. Sure lots of folks claim to have great track records... but not often documented by anyone else. What is true on the macro level is also true at the sector/industry level and among companies in a specific industry. Yeah, Billy Miller at Legg Mason is exceptional. So was Peter Lynch for a decade or two. Warren Buffet seemed to have the golden touch for a long time. And I know of one friend who probably batts around .650 on stock picks - which is very exceptional... when he talks, I really do listen. But that is just a few folks who consistently picked winners over an extended period of time. I have concluded that for most folks, the percent you assign various assets pools accounts for the bulk of the differences between most portfolios. Folks with high equity (aka stocks) percents tend to have the best returns over the long haul. Those with a significant portion in bonds are a couple of percent lower. Those with cash/CDs a little lower still. Within the high percent of stocks, those with a slight bias towards grow have over many periods (but not recently as with value and commodity based firms) done a little better. Another aspect of this myth is that it assumes that the individuals goal is to "Beat the Market". If a couple starts early, saves a good chunk of their income, and makes reasonable investments - they should get very good results, perhaps multiple millions for retirement. Investing is a game of walks, singles, bunts to advance the runner, and occasionally an in the gap double. Folks that are constantly swinging for the fences - taking big risks on long shot investments - tend to strike out a lot. Maybe the problem here is that everything in our society seems to be happening faster all the time, yet investing is more like watching paint dry. When you invest in a company or a stock mutual fund, you a making a wager on capitalism. Over a long period of time, companies tend to grow and increase their profits. Incentives for hard work, ability to take advantage of your inventions, problem solvers, innovators... out number the Enrons and Worldcoms. Rant off. Look for long run success in investing - time is your friend. Expect modest risk taking to pay off because the stocks are underpinned by the success of capitalism. No guarentees, just a long track record of probabilities.

Most of the differences in performance comes from what asset class (money market, bonds or equities) that you choose rather than variations across years or among sub sets of an asset class. The main asset class of equities includes many sub sets like growth companies, dividend paying, sector (tech, health care, resource) and regions (Euro, asia or individual countries). It is very hard to determine which sub groups will do better than average. Lots of folks try, few are consistently successful. You may enjoy the analysis and decision making... but do not expect to be above average on any consistent basis. When you narrowly bet on a niche within equities (such as international) you reduce diversification and expose yourself to increased volatility. While you may look at historic data and see a large percent difference in performance - finding that gap in real time with real money on a consistent basis is very hard. You might only eke out a fraction of a percent. It is easier to see the difference between different asset classes. Over the long haul, equities have out performed bonds. Bonds have out performed money market accounts. The gap between bonds and equities is more in the 2 to 3 percent range. So... why shift back and forth from equities to bonds when you have a 30+ year horizon. And, then spend lots of time trying to out guess the markets for a fraction of a percent within the equity class? One final point. I said 30+ years because you don't stop investing on the day you retire. You will propably live more years in retirement than you spent working. I normally recommend that most folks in their 60s and 70s keep the majority of their funds in equities. An even greater percent for those with substantial assets and pension/IRA income.

Also no record keeping responsibilities beyond what you need to track your own portfolio. I wonder about the methodology you will use to make switch decisions. If you are just getting started, you might be better off in the long run to keep your assets in equities (stocks). Do not assume that bonds funds have no risks. First, NAV can go down when interest rates change. A second kind of risk is that the bond fund performance does not measure up against inflation. I am not a big fan of 100% of your assets in a specialty fund (international, sector, region/country, industry, etc.) as you increase your risks with minimal upside. You did not mention your age, when you plan to retire, or your performance goals. If you add some info in a subsequent post, I can give you better feedback.

From the responses to comment period on SEC rules..... http://www.sec.gov/rules/final/34-47752.htm 103.122(b)(2)(i) Customer information required. The proposed rule would have required a broker-dealer's CIP to require the firm to obtain certain identifying information about each customer, including, at a minimum: (1) name; (2) date of birth, for a natural person; (3) certain addresses;55 and (4) identification number.56 The NPRM further stated that in certain circumstances a broker-dealer should obtain additional identifying information, and that the CIP should set forth guidelines regarding those circumstances and the additional information that should be obtained.57 Three commenters submitted comments on the required information component of the proposed rule. One commenter pointed out that certain persons may not have permanent residential addresses because they are military personnel living overseas or are living on boats. This commenter suggested the rule only require that a mailing address be obtained. Another commenter suggested that the rule permit broker-dealers to open an account even if all the minimum identifying information is not obtained, provided the broker-dealer has a reasonable belief that it knows the customer's true identity. The final commenter suggested the rule be risk-based with respect to the required minimum information. This commenter also stated that the rule should require a mailing address only. We are adopting the customer information provisions substantially as proposed with changes to accommodate individuals who may not have physical addresses.58 We believe the minimum required information is collected by most broker-dealers already, is necessary for the verification process and serves an important law enforcement function. Accordingly, prior to opening an account, a broker-dealer must obtain, at a minimum, a customer's (1) name; (2) date of birth, for an individual; (3) address; and (4) identification number.59 The address must be (1) for an individual, a residential or business street address, or for an individual who does not have a residential or business street address, an Army Post Office or Fleet Post Office box number, or the residential or business street address of next of kin or another contact individual; or (2) for a person other than an individual, a principal place of business, local office or other physical location.60 We are adopting the identification number requirement substantially as proposed.61 For a customer that is a U.S. person, the identification number is a taxpayer identification number (social security number or employer identification number).62 For a customer that is not a U.S. person, the identification number is one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.63 This provision provides a broker-dealer with some flexibility to choose among a variety of information numbers that it may accept from a non-U.S. person.64 However, the identifying information the broker-dealer accepts must permit the firm to form a reasonable belief that it knows the true identity of the customer.65 The proposed rule included an exception from the requirement to obtain a taxpayer identification number from a customer opening a new account.66 The exception would have allowed a broker-dealer to open an account for a person that has applied for, but has not yet received, an employer identification number (EIN).67 We are adopting an expanded version of this exception in the final rule.68 As proposed, the exception was limited to persons that are not natural persons.69 On further consideration, we have determined that it is appropriate to expand the exception to include natural persons who have applied for, but have not received, a taxpayer identification number.70 We also have modified the exception to reduce the recordkeeping burden. The proposed rule would have required the broker-dealer to retain a copy of the customer's application for a taxpayer identification number.71 The final rule permits the broker-dealer to exercise discretion to determine how to confirm that a person has filed an application.72 I also found footnote [4] on another document (which I can't cut and paste) which said that previous exemption for the military was inconsistent with the new rule. Page 48 of the SEC response to comments.

Confirm 2010? That is not really possible. Given some of the odd changes for inheritance taxes and other programs like 529 sunsetting, I would expect a lot of new legislation before 2010. Under todays rules.... you would pay tax on the gains but not the original after tax amounts converted. That is a very simplistic explaination - you don't get to cherry pick which part is converted. It is done on a prorata basis.

Yes, you can contribute non-deductible amounts to an IRA that started as deductible. What you must keep seperate are [/u]contributions between you and your husband (I in IRA = individual!) and Roth contributions must put in a separate Roth account. Yes, you must keep track of your deductable and non-deductable contributions. With your regular IRA, keep a file or three ring binder with contributions for each year. Some accountants include an IRA form each year so that you only look back 1 year for the accumulative contributions data. Note, over many decades, the contributory amount tends to be a smaller and smaller part of the total due to compound growth. IRA vs ROTH - These are both related and very different. Roths have no tax on normal distributions. You can take Roth contributions out at any time without penalty. Roths have no required distribution schedule. Compare this with regular IRAs which have restrictions/penalties for early withdrawals, mandatory distributions, and get taxed at ordinary income rates.

A couple of points: I think you are confusing old/new, deductible-non, and IRA vs Roth income thresholds. The deductible income limit has bumped higher - 70-80 range. You need to look carefully at the tables in IRS publication 590 (starting on page 14 of the 2005 booklet) and determine which scenario applies to you. Besides married, there are issues of filing status, income, and participation in a "plan" at work. I suspect that you can contribute non-deductable amounts to this IRA. These limits/thesholds do change so you need to check each year to see what will apply to you. Roth conversion income limit is 100k for 2006 for married filing jointly... but keep an eye on this limit as it may be removed in future years if current legislation holds. Roth contributions - modified AGI is 150K, with phase out between 150-160K. This means you might also qualify for a contibutory Roth. FEE ISSUE: Sometimes Fund families will waive the fees or minimize the charges if you just "ASK", but also if combined balances exceed a fixed amount (5-10k is common), or if you elect electronic (e-mail) statements, or commit to a monthly contribution program. That's a lot of choices for eliminating pesky fees. But, in the big scheme of things, that $10 is low to begin with and will look a lot lower as your account grows. Call your custodian - have a chat. They will certainly like to hook additional business from you now that you are moving into a higher income. Some funds will also let you pay the fee with a check each year so your IRA does not get dinged.

In your case, build up your funds and when you hit the minimum transfer to a fund. Many funds will allow you to start and IRA at a lower amount if you commit to a monthly automatic contribution. I don't know if Fidelity has this - so this section option might apply to others who have not yet picked their custodian. Your alternative approach also works. The difference is so tiny (taxes owed) that its a non-factor. The bigger hurtle is to dedicate a significant amount of your current income to the plan. A $100 per month only puts $1,200 to work each year! Note, purchasing a mutual fund in even $$ amounts each month is "dollar cost averaging"... which means you buy more shares when the fund is down, a slight bow to the "buy low" concept.

To college girl: Congratulations on getting started. You have many years of compound growth ahead, which rewards those that start early. BUT..... that 3.2% interest rate is terrible. Your money is barely keeping up with inflation. Continue what you are doing for now, then when your Roth assets grow to $2000 you need to look into transferring the account to a mutual fund. Search on "mutual fund" and you will find lots of discussion about how to choose a NO Load fund. Here is why 3.2% should only be a short term approach: funds invested in a diversified stock portfolio on average double in about 7 years. Funds earning 5% in a CD double in size in about 14 years. Lets use 2000 and assume you are 22 years old and retire at 66. At 5%, you will get approximately 3 "doubles", so your $2000 will grow to $16,000. But if your mutual fund averaged 10%, your 2k would grow to $128,000 over 44 years because you assets double in size 6 times! (To find how fast a fixed amount will double, divide 72 by the annual percent earnings to get a "rule of thumb" estimate of the number of years to double. This is called "The Rule of 72". Example: at 5% you have 72/5 or about 14 years. At 10%, 72/10 is just over seven years.)

My field of expertise more involves investment choice, stocks, funds, real estate (an I am loathed to bring it up again), and the risks/performance of different investment choices. I thought you got your direct answer before I posted. I added my post because I think your client's experience would be instructive to investors who might be tempted to buy things they did not understand or take unwise risks because they did not investigate the investment/company before acting. There are often over 100 general readers for each thread, although perhaps only a few are directly involved in the same circumstances. All that said, I do have some experience with custodians and year end asset valuation. For 99% of the folks who read this thread (but not your client) this is a non-issue as the custodian simply uses market value (often the closing price) at year end for stocks, bonds, and mutual funds (funds must do the same with the individual portfolio components). BUT... perhaps less than 1% of the IRA/Roth accounts include something that may not have an easy market price at year end. One year, I held a few thousand shares of stock in a company that planned to be listed on the NASDAQ but had not yet traded. Before I could purchase these shares (long story, but I had priority rights) I had to sign a special custodial form that said the custodian did not approve or disapprove of the investment, that I was to rely upon my tax adviser, and I might be held liable to paying for an independent assessment of the valuation of the investment at year end... each year at year end. I have seen this treatment a number of times, special custodial rules regarding unusual investment. So... my questions to you are: What was the connection for this investment - it sure doesn't sound like a common stock company openly traded on an exchange? You referred to this as some kind of pyramid or Ponzi scheme.... how did that ever get by the typical investment exclusions most custodians impose. If this was not a typical stock/bond/option investment, did the custodian raise questions or seek a signed release before allowing the transaction? In my example, the custodian could have forced me to hire a consultant to pin down a valuation. Fortunately, I was able to convince the custodian that an alternative would suffice. Although you have framed your posts in terms of custodian responsibilities and tax payer RMD obligations, there are some other issues that I think are worth discussing for the benefit of general readers.

Leasons for the average investor: 1. Don't deligate your "due diligence" to anyone else. Many bad idea could be avoided if investors just read the risk factors section carefully. If your accountant advises against the idea - think twice. If your buddies are not interested... maybe you too should look elsewhere. 2. Don't invest in anything you don't understand. 3. Don't fall for a supposed fabulous performance record. First, you don't need to hit a home run with every swing... getting to first via single, bunt or walk will probably get you to your long term goals. While there are ways to get double digit returns via careful investing, promises of more than 14% annual returns are generally BS. There is a radio ad on a number of talk shows that suggests you can earn $4,500 a MONTH! on a 25 to 45K investment. My math says that that is over 100% annaul. Complete bull, its a fair tale. If it was that easy, I sure wouldn't be talking about my "goose" to the general public.... I would want all the golden eggs. Billy Milller at Legg Mason is one of the great stock pickers (beating the S&P500 many years in a row), but is only a few percentage points above the long term average in stocks. 4. And finally, you can't lose 100% if you are diversified across many kinds of investments. Even in a stock market crash, everything does not always go south at the same time. A blend portfolio of stocks, bonds, and mutual funds is unlikely to drop more than 30% in a crash (although that is clearly still ugly).