John G

I am no fan of "other" which ussually means banks or insurance companies. Both mutual funds and brokerage options are viable. Since you are just getting started, you will probably be owning one or two mutual funds which can be done either directly with a mutual fund family or via a brokerage. Most brokerages give you access to hundreds if not thousands of mutual funds across fund families. If you choose a mutual fund you will be selecting from a narrower set of funds they managed .... but that often means picking a fund from a list of 10 to 60+ funds. I don't think you will find a lack of investment choices to be a problem. The opposite is probably true, you may spend too much time trying to make a perfect choice from too many funds. Are you more comfortable with using a custodian that has a local branch office? Some companies like Scottrade, Schwab and Fidelity have offices in most major cities. Others, like Vanguard prefer a main office 800 numbers and a website. Almost all companies (especially the three you mention) have very good websites. Generally levels of service are pretty good. Fees will vary slightly among custodians. If you have other accounts, a sizeable Roth, or are willing to elect email notifications (such as with Etrade) you can avoid or minimize annual fees. I would contact three different custodians and ask for information for the beginning investor. Then visit their websites. Ask about annual fees. Look at a couple of broadly based NO LOAD mutual funds - especially those with annual expenses below 1%. You can't optomize a choice like this. There is a wide array of mutual funds and custodians that will work for you.

To "leave" a Roth to a grandchild, you must designate them as a "beneficiary" of the account. Funds passed out to a beneficiary just as they would eventually pass out to you - tax free. Check your beneficiary (primary and secondary) designations with your Roth custodian. NO, they can not add to what was your account, but they can start their own Roth IRA if they have earned income and otherwise qualify. Are you sure that you have Roths? I am wondering from the language you used - 5 ladders - probably refers to some kind of bonds or CDs in a single Roth. There is no reason that I can think of to have five different Roths as everything (investments, ladders, beneficiaries) can be done with a single Roth.

Ty, well said. There is a lot of gimic, plus obscure and conflicting explainations. Investors should avoid brokers, newsletters, advisors or funds that suggest that they can enter and exit the marketplace to smartly time investments. One of the characteristics of markets is unpredictability on a day to day basis. I have never known or met anyone who can consistently and successfully be a market timer. Is today high or low? Is 2005 going to be a good year or not? I don't know and I don't think anyone else does either. When a fund says they will be 80% in stocks and they are 80% in bonds - you can't rely upon them. But, the number one reason for not even considering these funds is the extremely high expenses.

IRAs are separate from your company plans. Within IRAs there are two main catagories: regular and Roth. Roth IRAs offer no tax deduction, but normally all funds in retirement can be distributed tax free. Roths also do not have any fixed or required distribution schedule, and you can withdraw contributions at any time for an emergency. Regular IRAs may either be deductable or not, depending upon your circumstances. The current maximum annual contribution is $4,000, boosted to $4,500 if you are over age 50. This maximum applies to the combined contributions to all Roths and IRAs in that year. Earned income, tax filing status and and total adjusted income are factors in determining your eligibility. See details in IRS Publication 590 or post again.

LRC - when I have time, I will be adding messages here related to general investing knowledge. I would appreciate if you add a reply and let me know if the material is useful. Given my time limits today, I am going to post on - Rule of 72 and representative returns. RULE OF 72 - This is a rule of thumb for understanding how fast any asset will grow in value for a specific rate of return. You could do a more precise calculation with an HP 12c calculator or spreadsheet - but this is a fast back of the envelope calculation. Rule of 72: Divide 72 by annual return for the investment to determine the number of years before the investment doubles in value. For example, if you have a $5,000 investment averaging a 7% gain each year, the rule of 72 says (72/7=10+ years) that your nestegg will double in just over ten years. So, in 10, 20, 30, 40, and 50 years your would expect to have approximately $10k, 20k, 40k, 80k, and 160k. What happens if the same investment grows 10% a year? Well, the rule of 72 says that you will double every 7.2 years and this same initial investment in 50 years would double two more times or grow about $640,000. That's a big difference from 7%... a trip to London, a new car and maybe a summer condo level of difference. I will apply the "Rule of 72" to some of the basic investment options using some long term average performance to create a ladder of results. Cash at todays savings account, checking account rates 2% annual rate, taking about 36 years to double Conservative bonds portfolio 4% annual rate, 18 years to double Bond mix, government, corporate, etc. 6% annual rate, 12 years to double Blended stocks and bonds 8% annual rate, 9 years to double Stock portfolio 10% annual rate, 7 years to double Stock portfolio slightly biased to growth 12% annual rate, 6 years to double You can see how it might be nice to double your assets in a shorter time period. But, what about risk? I hope you realize that all investments have risk. The short term risk (under 5 years) is generally related to the level of return. Low returns are usually "safer" but may not give you a chance to reach your goals. Low returns run the risk of not keeping up with inflation... for example your current investments are clearly not keeping you significantly ahead of inflation. However, over long periods of time, the average performance rate is more likely to dominate. For example, every 20 year snapshot of stock market performance in the past 100 years has a positive rate of return. My time series data suggests that there is just one ten year snapshot in the past twenty years that did not have a positive rate of return. While there is some disagreement about the long term average for stocks, but most sources put it just above 10% per year. Many financial planners conclude that the longer time you are compounding, the greater percent of your portfolio that should be in stocks. But, folks attitudes toward risk and their timetable can vary. Right now lots of folks are scared about owning stocks because of all the dot.com disaster stories. That is sad because back to back bad years are extremely rare. Some of the best up years have followed the annoying down years. More about this later. My goof. I corrected the bad math above! 72/7 does not equal 7 . . . good thing my mother did not read this post. A good example of the goofs we make when we rush and don't proof our work. I revised the above and hopefully clarified the material.

Custodians report at the end of the year the annual value of IRAs to the IRS. Distributions are reported, since they may be a taxable event... this includes anytime a check is delivered to the tax payer, such as when an account is closed. I have always assumed that these are reported annually, but when they are reported makes no difference in what is owed. Perhaps one of our accountants knows. Buy/sell transactions within an account are not reported.... there is no 1099 for IRAs.... many years ago I asked for a 1099 on an IRA at Bear Stearns (brokerage) and was told their computer system is not set up for such a report. An annual summary of transactions would be helpful. I do not believe any reporting occurs with custodian to custodian (direct) transfers of an account. This is not a tax event. Note: what the custodian reports or fails to report does not effect your liability to pay any taxes that are legally owed based upon your transaction. If you close an account and trigger taxes or penalty, you should talk with your accountant to determine if estimated taxes should be paid. Can you explain why you are so interested in what is reported and when the reports are filed?

I wonder what sales person talked you into this? I am not a big fan on annuity products in Roths. You are mixing investments with insurance - in my experience most folks are better served by keeping them seperate. They generally offer meager returns. Insurance companies are notorious for writing policies in something other than English and tacking on various fees. But.... you have not said how old you are, when you expect to retire, the approximate amount of money you have committed with State Farm, anything about your investment experience, or your risk tolerance. I am not 100% confident that I understand what your current insurance product provides. If you post more information I can add to the brief response below. Annual fees for Roths: These range from zero at Etrade (using them to represent internet options where you elect email notices, or with most vendors if you assets are above $x,xxx or if you have other accounts), to nominal $10-25 a various mutual funds and discount brokerages to 30-$50 at boutique or full service brokerages. You can ask for your custodian to waive the fee - often they will. You can pay the fees by outside check to avoid reducting your Roth assets. Frankly, the recent direction has been towards lower fees because of competition and internet automation.... and then you have insurance companies and banks were "fees" are ingrained in the profit picture. Back-end loads - In the "good ole days" all mutual funds and many insurance offerings had front end loads. When NO LOAD options starting taking away their business, some companies switched to back end loads. But as more consumers figured out they did not want to give away 5 or 7% of a million dollars, back-end loads switched to declining loads... such as you 1% declining load. After all, the sales people could say "you should be a long term investor". There are plenty of mutual funds with front end or back end loads that have served their customers well. But, with about 1/2 of the fund industry available in NO LOAD form, why even consider a loaded option. Deano, I without additional information, it is hard to address you "should I move" question. My guess is that your Roth may be giving you a annual return of 3-4% which is very weak. You might want to consider not putting any additional cash into this insurance product and choosing a different investment option.

I am assuming that you mean that you sold three stocks and bought some mutual fund from within you Roth with the available cash. Tax deduction for loss? NO, you can only get a tax write-off if you close all of you IRAs or all of your Roths (depending upon which type of account has the losses) and then you can claim a loss, subject to certain percent limitations. For about 90% the paperwork, hurtles, , and the percent limitations will indicate trying to take a tax write-off is not worthwhile. See IRS publication 590 for additional information.

If you purpose is to move your assets from one custodian to another, then I highly recommend the "direct transfer". You need no permissions. There are no tax consequences. To effect this transfer, you take a copy of your most recent statement from custodian #1 to the new custodian (#2). You ask custodian #2 for the paperwork for a direct IRA or Roth IRA transfer which is one or two pages including name, address, date of birth, ssn, and beneficiaries. Fill this out and give them the copy of the monthly statement, the new custodian does the work for you. You can specify if everything or nothing is to be liquidated before the move. This event has no tax consequences and you have no reporting requirements or taxes due on your 1040. By far this is the easiest way to change custodians. The process might take about two weeks. There is no 60 day time limit. You also may elect at any time to close your IRA or Roth and ask for a check. This creates a potential taxable event and a report to the IRS. You then have a 60 day window to roll the funds into another IRA or Roth (like to like). I do not recommend you take this route with a rollover as there are many things that can go wrong. Additional issues: you may be charged a plan termination fee, but the receiving custodian will often replace this loss if you ask. Note, some mutual funds or other investments may not be able to be moved because of their link to custodian #1.... therefore these would have to be sold before the move. You need to remember to check in the following monthly statements to make sure this was done correctly.

Good for you! You plan for three! I will post again soon, but want to thing about how to proceed. Another question: do you have a company program? or are you a teacher by any chance?

OK, the first step is always to figure out that something is wrong. Here is what I suggest that you do. 1. Don't add any new funds to these accounts. Let me know if you are trying to put in funds for 2004 by April 15 and I will give you a fast track answer for those dollars. 2. Tell me a little about your training/education/experience which will help me give you some guidance. For example, are you comfortable with doing things on the internet? Maybe you can address how you respond to taking risks - like moving, taking a new job, or how you were brought up to view money matters. 3. My response may have been more detailed or used jargon with which you are not familiar. I can try to clarify. 4. I can give you some suggestions of reading materials that might get you back on the right track. If you want to do this well, and I hope you do because a lot of money will eventually be involved, you probably need to devote about 1 hour a week... maybe a little more when you first get started. Don't be intimidated by the task.... you don't have to be a math wiz or rocket scientist to learn the basics. Some of the best investors I know have just a high school degree. One guy never graduated from HS and has run a deli all his life. 5. If you have kids, we might as well bring them along. Teenagers are fascinated with money and if they have earned income they too can have Roth accounts. 6. At some point, you probably will feel comfortable with a new custodian and will arrange for that custodian to file the paperwork to collect all the assets at ING. But, that is in the future. For the moment, don't do anything with ING or these funds. Having an advisor that is related to your boss is not a great idea. While there are great advisors, I find that all to often we think folks must know something because we have no experience. Frankly, some of the folks who pass off as advisors are terrible and respond first based upon the interests of their client. I have a friend who lives in the high end world of investing and he has said about money managers and advisors: "these guys are really good at babysitting money, but most of them don't really know much about how to earn money and how to make good investment decisions". Babysitting money - let me define this as sitting on millions of dollars in a fund and taking an outrageous 2.44% each year for minimal effort. Let me give you some motivation. I did a very rough calculation that if you were to continue on this path, you might be able to built 250,000 in your Roth by age 67. Replacing this approach with something like what many people do which has a significant stock component should build a nest egg between $760,000 and $1.2 million by the time you are 67. I express this as a range because we haven't talked about a reasonable mix of investments for you.

Ty said: At least these funds were diversified (not individual stocks), with allocations across stocks and bonds. I though so at first because that is what some of the summaries said. BUT, right now both of these funds have swung way over towards bonds. There is a good lesson here - funds do not always remain true to their stated investment plan. In the biz, this is called "drift". One way to check if a fund has changed emphasis is to look at the top holdings and the main assets catagories which are included as either charts or tables in most fund summaries. Thanks TY for figuring out W was actually VV. I spent too much time trying different possibilities in Google with no success.

Demo said: below category average expenses above category average performance for 5 & 10 year horizons Morningstar rating of 4 *'s or better No front end load No deferred load Initial investment of 1000 (I'm assuming your current Roth balance in the 8 - 10 k range which would let you pick 8-10 funds) I agree on: Morningstar as a screening tool, choosing NO LOAD funds, and avoiding deferred (back end or exit) load funds. But, I would not suggest that folks pick 8-10 funds. Too much work. Plus, most of the diversification of the portolio can be accomplished by picking just one or two general funds. One or two well managed funds (either actively managed NO LOAD or index fund) with perhaps 300 to 500 holdings each is probably just as effective as 10 funds with a 1200 holdings and very likely more than 50% overlap. Overlap in holdings becomes even more likely with large funds, which because of their size must hold the stock of large companies like Walmart, GM, GE, Microsoft and Johnson&Johnson. I would not suggest that someone switch around funds on a 3 or 6 month schedule. First, the temtation to chase recent hot performance is generally a bad idea. And, frequent switching increases the workload and tracking requirement. For some funds, you might get charged for short term changes... something getting more common. Remember, past performance is not a very good predictor of what will happen in the next 3-6 months. You don't need to hit the 90% mark of perfection to produce great results in your Roth. The two biggest factors that will effect the growth of your Roth assets are: (1) time for compounding, and (2) asset allocation. If you buy on the worse day every year (at the market peak), you still will get very good results over many decades because of tax free compounding. Asset allocatioin refers to what broad catagories of investments are in your account. Money market funds or CDs earn very little on average. Government bonds are next in the food chain. Then other bonds. Then equities (stocks). Lower risk and especially guarenteed investments give the lowest returns - they don't need to pay more because they have the appeal of "safety". The higher risk catagory - stocks - has short term flucuations, but over the long haul, many decades, produces the best returns. I would rather a new investor spend more time understanding investments rather than devote so much time in short intervals making new decisions. If you spend more time learning and make good choices, you might just be able to keep your funds for a long time. For example, consider a fellow that picks two funds that return 15% in a good year when the average fund is up 13%. That is a decent result. You can get into a lot of trouble switching to any fund in the top 10% that might have been up 20% that year. {ask some of those folks who chased the dot.com, tech and telecom funds in 1999 how they feel about performance chasing]

Whoaaaa Nelly ! We got this here so called investment "advisor" tied up to the corral and are deciding if that barrel of hot tar and those pillow feathers are needed. LRC - I believe you have gotten off completely on the wrong track and if the following sounds harsh, I hope you will understand that I have to cover a lot of issues and there is a large number of visitors to this site that have the same problems getting started with investing. What I took from your first post: (1) you don't know what you own, (2) you don't understand your statements, and (3) you relied on a salesperson to make your investment decisions. You just "bought" about $10,000 of a product that you apparently did not spend much time to understand. I suspect that if you spent $10k on a trip to Europe, you would have spent a lot more time before you boarded the plane than you spent on this investment. Your advisor (arghh, I use that term very loosely) has put you into two funds that are awful. The ING group makes oddball commercials, but apparently comes up short on these offerings. Let me count the reasons: PIIBX (all mutual funds have five letters and their symbol ends in X) This is ING fund called Principal Protection II that has some trick components, like promising no decline in principal in the first five years... but language that is so convoluted that I still can't completely comprehend the meaning after five readings! It supposedly has 80% of its assets in stocks (not! see below). 1. 2.44% annual expenses! This is really bad, way too high for a fund that holds almost the same stocks (when it holds stocks) as the Vanguard 500 that has annual expenses of under 0.2%. Translation - you are giving up more than 2% for supposed active management. 2. This fund is supposed to be 80% in stocks - but in the most recent snapshot shows that they are 90% in various bonds. In the investment business that would be called serious "drift" - Robinson Crusoe type drift. 3. This fund has a 5% back end commission, which apparently declines over five years.... I note that the ING site did a good job of hidding this fact and did not fully explain it. 4. Performance of this fund for the past three years has seriously lagged the S&P 500 and the fund ranks in most services in the bottom 10% of all funds. 5. I note that this fund says it is "conservative" allocation. Now there is a term that is misused. Money contributed to this fund has not kept up with the rate of inflation.... how could it when low yielding bonds get 2.44% taken off the top for expenses? V V P A X - Principal Protection V, again an ING fund 1. This has a 5.75% front end load - that is money that goes to ING for paying your "advisor" a commission. Note, that about 1/2 of all funds have no such front end or back end loads... these are called NO LOADS. You are not yet back to even on this fund after getting hit for this front end load. 2. Did you know that although this fund says it should be 80% in stocks that at this moment it has 75% of the portfolio in bonds. Another "conservative" approach that is not keeping you ahead of inflation. Another example of drift away from what some summaries of this fund say is the focus. 3. 1.67% annual expenses - better than 2.44% but way way too high. There are many NO LOAD funds with annual expenses below 1%... some even below 0.2%. 4. One reason for the high expenses might just be the 53% turnover of holdings. Since this fund is supposed to contain blue chip (large, big name) companies and government bonds, why the need for high turnover? 5. This fund started in Jan 03 and the assets rose 1.35% in the first 9 months, then up 2.4% in 2004. Not exactly great performance. It ranks near the bottom of all funds.... but hey, you get to tell your friends you have "convservative" investments. (clearly a marketing gimic rather than a great approach to investing) Conclusion 1: These two funds are awful. If you had invested in a basic index fund, you assets would have increase about 15%. The data on these two funds suggests that you current balance is less than what you contributed. They are not likely to produce reasonable results - like the basic one of keeping your money ahead of inflation for starters. The loads and annual expenses are not reasonable. Sell them. Conclusion 2: LRC, you need to spend more time learning how to invest and to understand what you are "buying". I highly suggest that you get a copy of the March issue of Consumer Digest and spend an hour reading the articles. Conclusion 3: I think your investment advisor gave you very poor advice. Fire him or her. You are age 33 and should have been investing in broad based stock funds that actually were in stocks. These two are not. You have many decades of investing and you can't build a decent retirement nest egg if you only make a few percent return. It is OK to mix stocks and bonds, but these two funds are so heavily in bonds you might as well call them bond funds. ING seems to be marketing gimic funds based upon fear of investing. An educated investor would not buy this stuff. LRC - the research to respond to your post took about 40 minutes and involved Google searches, and looking at mutual fund summaries at Etrade and Schwab, then about 30 minutes to type. I agree with most of what Demo and TY posted. You need to understand that ultimately you could to have hundreds of thousands of dollars (if not millions) in your Roth if you make wise choices... and that really takes some time. I know I did not address the question of how to proceed, post again if you want me to lay out some options and suggest a path.

Do you have a part-time job or any "earned income"? If not, then you are not eligible for a Roth. You might be able to convert an existing IRA to a Roth, but that may not be attractive because you would be paying taxes on the conversion. The math is pretty complex and the "answer" depends heavily on the assumptions you use about current and future tax rates. You mentioned grandchildren. One option you might consider if they have earned income from a newspaper route, babysitting, summer jobs, etc. is that you could encourage them to set up a Roth account. This does not directly benefit you, but might get your grandchildren to learn about investing and give their initial contributions more years to grow.

LRC - the last 3 1/2 years have been choppy waters for many investors, a mix of modest up periods offset by some down periods. You are not alone in wondering if your Roth is "performing". In many ways, while this may be disappointing, it is not completely unexpected. The markets don't consistently chug up hill at a 10% clip each year. However, good years significantly outnumber bad years and the best of the good years are much more up than the worse years are down. (not easy to say, more easy to see in a time series) When I teach my Junior Achievement economics students about the stock market, I ask some of them to compile the total up and down years and then look at the five best and worse. I use a couple of time series that cover anywhere from 50 to 73 years. There is nothing like hands on working with data to demonstrate that while the "market" does not always go up, the long term trend has held for many decades, demonstrating that wars, drought, inflation, depression or which party holds the White House is not as significant as the economic drivers of capitalism. If you will post some additional information about the investments in your Roth, I will give you a second opinion. Are we talking about mutual funds? Are you paying front end or exit commissions (also called "loads")? Did you contribute in lumps (dates would be helpful) or on a systematic investment from your checking account? Has you advisor changed your investments or kept you in the same positions? How much time a month are you willing to spend making investment decisisions? When a position goes down, are you more inclined to buy or sell? What annual rate of return do you expect? Tell me something also about your attitude about risks. (lots of questions, hopefully your advisor asked you some of the same ones) Post again, and I will give you an alternative view. I will need the exact name of your holds... preferably the multiple letter symbols that you will find on your monthly statements.

YES, to any combination of contributions up to the maximum allowed, prior to the deadline for the year you are contributing. Other YES's: You can contribute to your Roth before you have actually received the earned income for the year. For example, some people write that check in early January (when they are initially eligible for the current calendar year) to have the funds sheltered for the full 12 months. One of the options that many people use is to set up your Roth for automatic monthly withdrawals from your checking account. This is a form of dollar cost averaging if set up with a mutual fund - you buy "more" shares of the fund when the price is lower, less when the value is higher. Note - all contributions should be confirmed on the next monthly statement. To minimize foul-ups, all contributions should designate on the deposited check the calendar year and IRA/Roth account number. You want to catch processing errors early when they are easier to correct. Wymer, I appreciate your brevity! I extend your clear answer to catch related issues of other readers.

Example #2 is instructive and on point. But, I think from a practical basis, this person can make either change as long as the total drops below $3,000 and the associated earnings are removed. Ideally, this would be done before April 15/tax filing.

Barry, I would assume that you could either withdraw $1k from the Roth, or completely withdraw the contributory IRA which was $1k... with the custodian including any of the earnings on the excess contribution. Is there a priority ordering for withdrawal, or can this taxpayer elect? Also, if any of these funds were actually added after Jan 1 of this year, I would assume that they could be reclassified as 2005 contributions. Unless the person is over age 50, the maximum contribution for 2004 is $3,000. In 2005, this max moves to $4,000.... but that does not apply to this question.

Star and DH - you already have an excellant tax shelter in a Roth. Think of what folks would do if they could transfer shares from a taxable account to a Roth. I own two stocks that are up more than 5x in the past three years... every share would get flipped to a Roth. It would be a huge tax loophole. With LT capital gains taxes at 15%, complaining does not sound good. Contributory Roths are just that - contributory. Congress gives you the option to shelter $4k a year. That is enough to build a $2 million dollar nest egg PER PERSON, if the tax payer funds the Roth at the full amount for 41 years and gets an average return of 10% per year. Make that $4 M if a husband and wife both contribute the max. I would hope we can all agree that everyone outside of Donald Trump and Michael Jackson can probably live on that. I have always wondered if the Roth was "invented" in part to help use get out of the social security inbalance. Folks that have a $4 M nest egg are not going to worry a lot about their SSN check. Oh, I guess this is just another Friday night rant. PS: folks that push hard on building a Roth nest egg get a couple of extra benefits. . . . no reporting on buy/sells in the Roth, no distinction between long/short term or dividends.

TD Waterhouse - example of a firm that has Canadian connections but also operations in the US. They do offer IRAs. But, you are not likely to find a Canadian brokerage company that only does business in Canada offering IRAs. I am not sure why you want a Canadian brokerage. You can own lots of different investments that have a Canadian connection within an IRA held at a USA brokerage. For example, I have shares of Norwegian, Canadian and Australian companies (via ADRs) in my Roth. If your question is related to the kinds of investments you can hold, ask your current custodian.

You fund a contributory IRA with cash. Transfers of other assets like stocks or bonds are not allowed.

Custodian has a fiduciary duty to abide by IRS rules governing IRA/Roths such as involving reporting, distributions, contributions, etc. Yes, you can change custodians at any time. Direct custodian to custodian transfer is the best approach and this entails filling out a new application with custodian #2, giving them your most recent statement from #1 and they take it from there. Brokers vs funds vs electronic vs local office - - lots of choices and combinations. I would start with what format are you comfortable using.... not everyone likes the low cost internet options. The custodians options will also vary on: annual fees, minimums to open, internet access, types of investments available, commissions, etc. Most brokerages give you access to a reasonable number of no load funds. But, so do most fund families. If you plan to stick with mutual funds, you might be happy just to take your business to them. Some custodians emphasize "advice" or even active control of your account, others expect you to make all the decisions. Talk to a few potential custodians, ask questions. There may be 500 to 1000 choices for custodian and many will have combinations of features that will work for you.

Gburns - I would generally agree that the match tips the scale with two caveats: (1) the match is at least 20%, and (2) the investment options are broader than just company stock. Examples of the second problem include: Enron and every dot.com (Webvan, El Sitio, and that goofy sock puppet company) that died.

Gburns - well said. The above responses were very perhaps too complex. Better to get started now and learn as you go. Trixie may want to consider setting up an automatic system to set aside a fixed amount each month straight from her checking account. And... do ask questions about your employer based plans. An employee match is often a great way to proceed..... but it is not a question of which, as you can do both a Roth and participate in your employee plan.