John G

You can withdraw Roth contributions at any time without penalty or tax. The key word is contributions. Earnings on those contributions are treated differently. It is not uncommon for mis-information for any of the following reasons: nuances in the question or answer details, rep didn't hear the question and gave wrong answer, rep did not have enough training, answer was correct but you did not hear it, etc. This "withdraw any time without penalty or tax" must be some kind of security mantra for many. Sure, you can do this.... but isn't the point of a Roth to use the common guy's tax shelter to maximum advantage. So, if you are tempted to take money out of a Roth - think twice. Money is cheap right now, its "on sale". Zero interest loans, zero interest credit card transfers, very low home equity loans, easy refinance terms, low brokerage margin rates - - all sources of cash for emergency use. And how about that internal family financing of offering your parents or grandparents a few points more than they are getting on their CD?

If you sell the stock, you will pay a small commission and probably 15% on the long term capital gains. Pfizer represents a blue chip drug company. After many years of great performance, it has been either moving sideways or down for the past 6 years. You are getting a 3.7% dividend. Sure, you can sell the stock and net about 3,000 in cash to fund a Roth. You can also use your cash reserves to fund the Roth since you would have both the PFE stock and the Roth funds still as a short term reserve. Or, you can use other cash. You may want to consider taping your checking account once a month on a routine basis to start building your Roth. This last approach is less "one shot" and more of an ongoing plan and you may find the mutual fund company holding your Roth will waive their annual fee. You have many choices - no one approach stands out as superior. I think your grandmother did a wonderful favor on exposing you to investing for the long term. PS: You did not indicate your ages or incomes, but 10k and the PFE shares is not really much of a "reserve" or retirement nest egg. Think about what you can do to build up you reserve and get going on a systematic investment program. Post again if you have more questions.

Wow, big issue. Noble cause. Many choices. Just be aware of the hype and crisis mongering among institutions that are angling for your business. BUT.... while there are hundreds of ways to approach setting up a college education plan, there are many pitfalls and traps include: some approaches only limited to tuition, too many plans have high fees and expenses, limited investment choices, limited track record of these plans, getting locked in to one plan (did anyone think about transfering assets?, seems like the answer is no), and questions about investment performance. Plans vary as to what happens to the money if the child does not go to college or a specific set of colleges. Avoid any program where the money reverts to the child at age 18 - beware the Dodge Viper alternative! You did not indicate your age and if there were any other grandchildren. You might do something very different (trusts, multiple recipient plans) if there were more potential students. This is probably the wrong web site for answering your questions. You may want to click on any of these websites or google away. US News - magazine has annual college issue each year, so you will find articles and comparisons at their websites: http://www.usnews.com/usnews/edu/articles/...08/8savings.htm http://www.usnews.com/usnews/edu/dollars/dshome.htm The College Board are the testing guys - they have a lot of generic material: http://www.collegeboard.com/student/pay/add-it-up/8850.html Schwab, Fidelity and Vanguard all have plans and decent general material related to what they offer: https://promo.schwab.com/ad046/ad046home.as...71-2130&src=KXT http://personal.fidelity.com/misc/gettings...nvestment_plans http://flagship3.vanguard.com/VGApp/hnw/Se...omepageOverview Bear in mind that many of the current benefits may expire before your grandson gets to college. You would hope they would be grandfathered (no pun intended) but Congress in a budget crunch can change the rules. If you and/or your wife expect to be living when your grandchild starts school - consider investing in a tax managed stock fund where you remain in complete control and many years down the road can sell paying only long term capital gains.

You can find a lot here by searching keywords, like "no load", "index", "mutual fund", "novice", etc. Sounds like your school district is about 3 decades behind the times. I know of a few places where there are "rebates" or "special services" in return for steering high cost business towards an agent. Only one agent? Did they ever consider a competitive market place for retirement money? Like put it out for bid? Having a plan devoted to anuities and loaded funds is completely out of touch with today's marketplace - a throw back to the paternalistic approach to employees... they can't be trusted to understand their options so mgmt will choose ultra conservative options. I would not be surprised if the annual returns that this group of choices has provided is 1 or 2 percent below average.

First, congratulations on thinking ahead. Time is an investors friend and starting early will produce a bigger nest egg. 403B - shame on school districts for aiming folks towards high expense products, commissions and stodgy anuities. My wife used to work at a District in Colorado where 10 out of 11 offerings were insurance based annuities with meager performance and high cost. You might want to ask your district to offer something better. BUT, you still may want to do this if your school district offers a match to your contribution. For example, a 50% match overcomes the typical commissions. ROTH - if there is no match, or you don't like your investment choice, then start with a Roth. Two important first decisions: (1) who will be your custodian and (2) your investment choice. The overall costs of a Roth can be zero to a very small amount if you choose wisely. Custodian: banks, brokerages, and mutual funds are the main choices. Bank offerings are often loaded with fees and weak performers - but you should at least see what your bank offers beyond CDs. Brokerages include full service, discount and internet based. If you are comfortable with using computers then I would suggest the internet approach as firms like Etrade, Scottrade, Ameritrade, Schwab, etc. have zero or low annual fees and many mutual funds to choose. Maybe the best option for you would be to open an account directly with a mutual fund - there are over 8,000 to choose from an you need just one. You can find lots of names in MONEY, Kiplinger Financial and the March issue of Consumer Reports. See comments bleow on NO LOAD. Investment Choice: You are going to invest this money for decades and need a reasonable performance that stays ahead of inflation. As someone just getting started, a stock based mutual fund is what you probably want. First, only choose from NO LOAD funds as these have no commisions. Second, look for low annual expense (try to stay below 1% in actively managed) and take a good look at ultra low index funds (Vanguard invented these, but Fidelity and others have reasonable clones). Third, if you decide against something like a total market index fund, then consider a fund with a broadly based portfolio with a slight bias towards growth companies. Mutual Fund Annual Fees: We all hate them, and often they can be minimized or eliminated. For example, if you do a monthly auto deposit, some custodians waive the annual fees. Others waive the fee if you use electronic statements. Often these fees are waived when your account balance grows beyond 5k or 10k. And, you can just ask them to waive the fee. Avoid anything more than $20/year as just too much. Even if you only can start your investment plan with a modest amount, go for it. Post again if you have any other questions.

I am not sure I understand your question but will take a shot at answering what I think you are asking. For all those under age 50, the current maximum annual Roth contribution is $4,000 or the persons earning income if below 4,000. If your income is below $4,000 you can still fully fund your Roth. In fact, someone else can fund your Roth as long as you qualify - parents for example can fund an employed teenager's Roth. If the second part of your question is about annual fees - some brokerages and mutual funds allow you to pay these separately by check. That check, earmarked for fees only, does not count against your maximum Roth contribution. You can pay for fees from savings - there is no connection to passive income. You did use the term "sales charges" and that can refer to other costs. If you are talking about mutual fund loads, you can totally avoid these commisions by choosing from the universe of NO LOAD mutual funds.

OK, thanks for the clarification. You are correct about a late start... but that is better than no start. Think "I am in charge". Pensions, social security and retirement accounts have evolved where YOU are in charge. You need to devote a couple of hours each month to reading about how to plan for your retirement years, and how to invest your funds. Two hours a month devoted to reading articles in Kiplinger Financial, Money, or the March issues of Consumer Reports would be a good start. You may also want to pick up a copy of "The Number" by Lee Eisenberg, a light read about the anxiety people have over planning for retirement. If your 401K has a matching component, I would fund it to get the match as long as you can have a diversified portfolio. {this is a caution against 401k that mandates company stock which could be a huge problem if your company is the next Enron or Worldcom} I would put less emphasis on your daughter's college fund. Reasons? First, it counts more heavily against any financial aide. Two, in-state tuition at public universities is still a great bargain and can be managed by student summer jobs, college loans and work study. Finally, if you daughter's grades are strong she can apply to a top private school and have a good chance of securing a major scholarship.... go to Princeton's website and try their financial calculator - with your numbers, the school would probably pick up 85+ percent of the costs of a 4 year degree. This is a high endowment, private school phenomena. After maxing out the 401k - the next priority is to try to fully fund a Roth. Both you and your wife (you didn't mention being married, so I am guessing and also writing for other late starters) can set aside $4,000 this year. This number may move up in the future, so check IRS publication 590 each year. What will 4K get you? If you add 4k every year between age 42 and 67 and earn a 10% return (investing heavily in stocks, with a slight bias towards growth companies) you might be able to get close to $400,000. Double that if your spouse also contributes. That's about 400k in a Roth, passing out to you tax free. Just the Roth, not including SS or 401K. At an 8% return, you would be approaching 300,000 at age 67. Where do you put the Roth funds? Since you know little about investing (see last paragraph) I would start with a NO LOAD mutual fund. Perhaps a total market index fund at Vanguard (you can find them on the web, hdq is in Pennsylvania) or a broad based stock fund with low expenses. You would be in a better position to "be in charge" after you learn more about investing.

There are two issues you face when starting a Roth: (1) who will be the custodian, and (2) what kind of investments will I make. There is lots of material on this topic - and you can search on key words or phrases like "mutual fund", "no load", "index", "fees", "performance" and "getting started". Custodians: main choices are banks/thrifts, brokerages, and mutual funds. Key things you consider in choosing a custodian: convenience, fees, available investment options, reputation/reliability and website features. There are thousands of choices - most people need only one custodian. Investment choices: stocks, bonds, mutual funds, index funds, CDs and money market accounts are some of the main choices. You don't indicate an age or provide much background on your experience. If you are realtively young and just getting started, then you probably will be investing for many decades and should probably look for a good mutual fund with a slight bias towards growth stocks. Another reasonable choice is an index fund because of the very small operating costs. The reason you want to be in stocks is because you are trying to build a nest egg that will grow faster than the damage or erosion caused by inflation. Post again if you want to provide more details, or have other questions.

This is very sad to hear. Frankly, the attitude at Scottrade is poor. Even if you put the wrong date down, it is a correctable mistake. Custodians make mistakes. Customers make mistakes. This one can be rectified. Time to visit a local IRS office and ask them if they will accept a letter of explaination to accompany your return.

Another example of poor customer service - made worse because of the dumb reason. I called the Colorado Springs office of Scottrade and they made this suggestion: go to your local office again, speak to the office manager or senior person in charge, then ask them to call the "back office" in St Louis about your problem. Scottrade staff are trained to confirm technical points with headquarters. You can also consider writing to the Roger O Riney, President of Scottrade. This is a company that is very fond of their JD Powers award for customer satisfaction.... so you might want to CC any future correspondence to JD Powers. Frankly, if you are still not satisfied, then perhaps you should yank your account and take it to another custodian. Keep your correspondence with Scottrade - the IRS might be willing to accept your explaination of the wrong year designation. You can talk with a local IRS office and/or include a letter of explaination with your return. Post again and let us know if your problem gets resolved.

All of the financial mags have an element of self promotion. Plus they all tell you about great investment ideas about a year late. I like Kiplinger because it covers home buying, credit issues, taxes, retirement accounts and some general investing. You have to read all of these with a well tuned filter.

I concur with Bird. These kinds of mistakes get made all the time. Scottrade has small local offices that seem to be independent franchises. The local guy may not be knowledgeable in all areas. I recommend that you call the main office and ask to speak with the IRA department not just the first person who answers. The "back room" IRA desk handles these issues fequently. Ask them to correct the year designation. TO ALL - - this post shows the value of checking your monthly statements to ensure that money gets posted correctly! I recently took a $4,000 check to Etrade with a letter of instruction and they somehow put the funds in my daughters brokerage account rather than her Roth. Don't assume your custodian gets it right. You MUST check your statements.

If you qualified for Roths in 2005, why not max them out for that year. I also am assuming that the contributions you have talked about are not for 2006. Then I would recommend that you find two good stock funds with a bias towards growth. Since these two accounts are a modest part of your entire investment package, you could take a more aggressive position on where the funds are invested. With a slight growth bias, these funds could grow to about 250K by the time you are 68. That's 250k x 2 or 1/2 million. So, I recommend you plant those two acorns for 2005. For subsequent years, maxing out the 401K match should be a high priority. As Bird has recommended, you might want to use a discount brokerage account for other investments. For example, you could place these funds into a tax managed index mutual fund. This approach limits your exposure on a year to year basis for interest, dividends and capital gains... which sort of mimics the tax shelter status of an IRA. The problem with standard IRAs is that distributions are eventually taxed as ordinary income... which is generally the highest tax rates. Age 28, making over 150k! Good for you. If one of you stops working, perhaps you will again qualify for a Roth. It looks like you have a bright financial future, so...... I highly recommend that you start a reading program about wealth management for you and your spouse. There are many issues to consider - possible college accounts when you have children, other tax shelter opportunities if you are self employed or own a small business, tax free bonds, home ownership, life insurance, wills, etc. Developing expertise in wealth management is a joint job, make sure you wife participates. For example, three hours a month reading two financial magazines (like Money and Kiplinger Financial) would be a good start for the first two years.

The opportunity to do a conversion for a specific year expires on the last day of December for that year.

Your math is off. The tax deduction value for this year can be predicted better than the future tax obligation on the IRA. You probably know you marginal tax rate for 2005. If you are successful in life and accumulate substantial assets, your future 15% rate could be way low. Some of the recent folks who have become seniors are suprised at their tax rates when the pensions and distributions kick in and all those exemptions have moved out and are married and the homestead mortage was "burned" years ago. Keep in mind that you will NOT be paying taxes on $6,500 but paying taxes on the future amount which is likely to be much greater. The younger you are, the bigger that $6,500 will grow. Hopefully, the immediate deduction is invested and grows sufficiently to offset the future tax obligation. There are lots of scenarios where the $1,000 in hand might not be the best choice. Also, you did not have to sell the assets in your Roth to recharacterize the assets to an IRA. If you had only one investment in a Roth with only one contribution, the recharacterization would have been easy... everything would just get flipped over to the contributory IRA.

Wow, now that is a complicated scenario. Since you were not eligible for a Roth, I am not sure you can withdraw the contribution and leave the gain. The gain might have to follow the contribution to the regular IRA. Has your custodian commented on this? Perhaps our accountants can weigh in on that point. It seems like a lot of hoops to jump through to get a tax deduction. OK, you want to reduce current taxes, and perhaps we are talking about more than $1,000. But is your current tax rate much higher than when you would make future withdrawals? Remember that seeking a deduction will mean that the 4K in a regular IRA will exit at some future date as a much larger amount as ordinary income. You would have to make some guesses about future tax rates to determine if there is a benefit. Keeping it all in a Roth is simpler - no future tax obligation, plus no required withdrawal schedule.

Your both right. Scottrade is using a method they think is defensible, by their general scheme, your incremental 4K became part of a portfolio that had a gain. Their snapshot should be account value when contribution was made vs value when they exited. That makes lots of sense an answer you would get from many custodians. The IRS supported your position which, while weaker, has some credibility. You can argue that you placed the funds into the account and kept them in cash waiting to see if you qualified for a 4K contribution. If you made not other transactions after the contribution date, you have an alternative scenario. As money market assets, those funds increased only a tiny amount. Sounds reasonable and looks like it is supported by the facts. You may want to get your accountant or tax preparer to send Scottrade a letter, which you could also include in your tax return. The problem comes in trying to get your custodian to change their conclusion as they will say this is too chaotic and introduce "exceptions". But, try again and perhaps ask for the main office retirement dept. The key is to get them to refund a check for 4K plus money market interest. You can try to file your return including a letter of explaination to the IRS that you spoke with their office and how you handled the arrangement. Close all Roths? Even if you can't get Scottrade to accept your position, I would not do this. You have not given us all the facts such as your age or your retirement account history. Those imbedded losses could look like a small splinter many decades from now when you account is large. The tax on $660 could be about $200 and frankly is less than what your time and your accountants fee for resolving this problem. As much as you might hate this answer, the best option might be to pay it and move on. If you are going to consistently exceed the income limits for Roths, you need to investigate other tax shelters like Keoghs, 401k, pension/profit sharing, etc. that will allow you build a bigger nest egg. You accountant can point out which programs best fit your circumstances.

You should talk to your local tax preparer or accountant who knows the details of your circumstances. For most folks, it just doesn't make sense to close accounts to take a tax loss that may perhaps be worth $1,000. Generally, you just can't flip the switch and reload the Roth. Your qualification may change or Congress may change the rules. Roths and IRAs are tax sheltered accounts and the rules governing them make it difficult to take any tax loss. If you feel that your tax loss is significant and you have very little in your accounts - go see your local professional, who can advise you on the details.

Good question. On a very simple level, having two separate accounts adds to recordkeeping and may mean you pay two sets of annual fees.... although you can mitigate the fee issue (search on "annual fees" or just "fees" on this message board for more info). A more complex issue relates to the difficult topic of marital assets. Roths and IRAs are individual assets and if your marriage ends in divorce, the name of the account may influence who keeps the funds. Another subtle issue is that IRA/Roths have death beneficiaries. Often you name your spouse as primary. But you may have different ideas about who comes next... sisters, children, etc. There may be other issues such as different ages (who hits 59 1/2 first) or different approaches to investing. Another factor might be the "education" issue - who is willing to spend time to pick mutual funds and monitor the results. It can be a joint project, but perhaps you are more interested. I would lean towards you getting started with a Roth and building up your investment experience. After a few years, perhaps you both will be funding Roths. But... this is a very personal issue and it would make a lot of sense for both of you to spend some time talking about your goals and agreeing upon a "plan".

Kind of a funny question. The Roth is a tax shelter where you normally want to put money to work and keep the result (gains) in the shelter working for you. The whole idea is to maximize the time funds are sheltered. You lose those benefits when you remove funds from a Roth. There is no relationship between the transactions you might make in a Roth and any withdrawals. Apples vs. shoes. You can buy/sell stocks, bonds, mutual fund shares, etc. inside a Roth without regard the the amount earned, frequency of transaction, length of holding period, etc. Long term, short term capital gains, interest or dividends have no meaning other than that the result changes your total Roth assets. You don't even report internal Roth transactions. You can always withdraw contributions to a Roth without penalty or tax. Gain on initial contributions is a completely different matter. There are also a few special categories - like first time homebuyers - where some withdrawals may be supported. You may want to review IRS Publication 590 for more details and examples.

Roth Rules! No tax. No penalty. No difference between holding periods as there is no such things as long term capital gains or ordinary income in a Roth. No reason other than your own personal monitoring systems to even keep a record of the transaction. You need to be more familiar with rules govening Roth IRAs. I highly suggest that you read some general literature about Roths. IRS Publication 590 is a start. Etrade has some materials on line. You can also find more in your local library, your own bank, Consumer Reports March issue of any year, and other financial magazines.

Buying a house is a big decision. You understand part of the picture. In some areas, owning a house (and not moving for 3+ yrs) can give you a modest gain. But, when you talk roommates and renting the house you are getting beyond the financial analysis and getting into how your personality matches up to those tasks. There is a huge difference between buying a house in a growing metro area vs. say central Pennsylvania where housing prices are not climbing much. A single guy, age 27 suggests to me renting for a little longer and building up your Roth and cash reserves. But, that is very long distance advice. Owning a home is going to tie you to the neighborhood for a long time. Talk to some of the folks at work or at your church. Before renting to others becomes part of your plan, talk to some folks who own rental properties. There can be major headaches - abusive renters, midnight calls about plumbing, legal battles to evict, etc. Not everyone has the time/personality to be a landlord. Good luck. PS: Life cycle funds are not bad, they just a marketing driven option that pitches simplicity. At age 27, you should probably be heavily or entirely invested in equities because you have such a long accumulation/building period.

Contributions to a Roth IRA can be withdrawn at any time without taxation or penalty. If your tax software has an 800 number or email Q&A site, you may want to contact them. They should distinguish between various kinds of withdrawals from retirement accounts. Both you and your daughter raided you Roths? That is unfortunate. There are many sources of funds (home equity loan, signature line of credit, margin borrowing, refinancing, relatives, etc.) for short term needs that should be considered before tapping a Roth. The average citizen has few tax shelters, so you generally want to use the ones you can.

Lots of questions.... I can address some, but others require more info to be posted. At age 27, just getting started, regardless of which company you choose (and there are many other choices like Scottrade, Etrade, Brown & Co, Muriel Siebert, Schwab, hundreds of other brokerages plus hundreds of mutual fund families) you basically need one broad based mutual fund for the next few years. Sure it won't hurt to pick two, but almost all mutual funds have plenty of holds to achieve diversification within their "catagory". You might even keep one general mutual fund for many decades, or as your total assets grow eventually add another fund or two. The arguements for one fund - keep it simple, avoid multiple account fees and you don't have to be perfect on diversification so most broad portfolios will do. If you would enjoy looking at how 2 or 3 funds perform, you might want to fund them all with equal amounts and watch the horse race... if that helps you stay interested in tracking your money. There are some significant differences between mutual funds. The biggest difference lies between the LOADED funds (that charge front or back end commisions) and the NO LOAD funds (no commissions). The next biggest difference is between actively managed funds (like Fidelity Contra) and INDEX funds whose portfolio is managed by a computer based upon one of the many lists (like Standard and Poors 500 large industrials). The annual expenses of various funds are another issue. And, finally, the scope, focus or investment objectives of the fund. I list this last because you should be choosing a fund with a broad portfolio rather than some of the very narrow niche products (emerging international health technology, or Japanese growth stocks). I am not a big fan of "fund of funds" of any kind. The lifecycle funds (2035 Fund) are some examples of this. The tendency is for you to pay two layers of administration expenses. I think most folks are smart enough to make a few adjustments in their portfolio every five or ten years. "Funds of Funds" are basically a marketing gimic. They are selling brainless investing. Regardless of what approach you choose, you shouldn't just put everything on autopilot for 40 years. You should look over your statements after every transaction to make sure it is posted. You should think about fund performance once or twice a year. Can you switch funds down the road - certainly, but I don't recommend chasing last years performance. Can you switch custodians - absolutely, and the best way to do this is using a custodian to custodian transfer. Fees - yep, funds and brokerages like to charge fees. But, you can ask for these to be waived. When you assets growth to 5, 10 or 20k the fees are often waived. Fees can be waived if you do a automatic monthly investment program, or if you elect for statements to be send by email. Not all custodians charge the same amount. Many have adopted an "early" exit fee.... but then the receiving custodian will often rebate that fee to you as they are pleased to get a new account. HOUSE BUYING: Too big a Q and not enough info. Are you married? What is your current income? What debts to you carry (car, college loan and credit cards... at what rates) The housing market in some areas has boomed the last few years so you see media reports of hot money being made for a 1 year hold. That is not normal. At age 27, you are more likely to be moving, marrying, changin family size, etc. You should not consider buying a house unless you expect to stay in that house for 3+ years. Do you like painting, repairing, and mowing? These become your responsibility when you own a home. Post more info and I will take another stab at your situation. There are a lot of good things about owning your own place, but you don't want to rush that decision. The size of the down payment has many complicating factors. You get better leverage on your investment if your downpayment is small. Mortgages are relatively cheap right now. One caution - where is your emergency or backup resources? What happens if you lose your job, need to replace a car or pay for unexpected repairs? [My 23 year old daughter just bought a house. What she did not know about that process could fill a book. Four months after buying the house she started talking about moving to another city!]

Clarification please: was this a contributory regular IRA or Roth IRA ?