John G

Ad? Not by me. Diagnositics suggest it is acceptable answer to "just getting started". Chance that this fund would be in the top 10% after 5 or 10 years.... probably no better than 10%. Disclosure: I have no funds now at TRowe. I did 20 years ago when I lived on the east coast. I do have money at other mutual funds and you won't coax a name from me. Mostly I am a stock picker/trader.

You are not going to get a lot of answers at this location because there are not of "analysts" or "financial advisors" here... mostly tax specialists. But let me demo how I might evaluate this fund: TRowe - reputable firm, been around a long time... OK NO LOAD - good, no in or out commissions FOCUS and HOLDINGS: Fund specializes in large cap stocks (big firms), preferred stocks (special classes of stocks that have first calls on dividends, but they don't have any of these right now), convertables (bonds that could convert to stock, but they don't have any of these right now), bonds, and money market cash .... Microsoft, Amerada Hess, General Mills, Loews lots of household names. But, I also noted that one of their top 10 holdsings is Marsh and McLennan, an insurance company riddled with scandal recently whose mgmt is being chased by Elliot Spitzer, Att General in NY. If they owned this before the scandal, they took a hit. If they bought it after the scandal broke, they are betting on an overreaction. A little spice to an otherwise bland list of large cap firms. Nothing wrong with the value approach. They lean towards stocks that seem to be trading below the range suggested by other stocks in their group. For the last five years, value has been the great strategy. In the future, there will be times where an emphasis on growth stocks will provide stronger results. Value will still perform, but lag the interest and rise of growth stocks. Virtually no one can tell you in advance which approach will work better for any period of time. Performance: this fund has been around for about 18 years and averaged around a 13% annual increase - better than OK, 13% is a good return. History: 18 years, $4.2 billion in assets.... size will make this a little less nimble than newer funds but this is no where near the biggest in size - OK Annual Expenses: 0.83% acceptable, I would be happier if this was lower, but this is a reasonable number for an actively managed fund. Manager: Boesel - no info on him, he has been with TRowe for a three decades Current holdings: Some surprises here. Zero preferred, zero regular bonds, 20% cash! 60% stock, 16% convertable bonds, 4% foreign. The average P/e is 14 which is below the general market. Earnings growth rate for the whole portfolio is 11% - middle range. IRA Rules: $1000 to start, $50 additional - typical numbers CONCLUSION: Perfectly acceptable approach for an initial Roth IRA account. Decent returns are likely, firm is established, strategy is biased slightly towards caution.

You already have all the information you need based upon you direct experience with Scottrade in a brokerage account: executions, customer service, statements, and investment options. A Roth does not change the company, it is just a coding of the account number to designate "Roth". Generally, having your Roth with the company where you have a brokerage account has some advantages: you know the website interface, you often get zero or lower annual fees, and in some cases all accounts may be summarized in one statement.

Buying stocks directly is not really an option for someone just getting started for ALL of the following reasons: 1. Beginnners don't have much skill or experience in picking individual stocks. 2. The amount of money to invest initially is small. 3. Given 2, it is hard to have a diversified portfolio. 4. While picking stocks is not rocket science, it does take time to research ideas and later to track results. Who says that mutual funds will perform below stocks? I sure didn't. But, since you are just getting started "better" or "worse" is not the issue. Someone who is just 23 is going to have retirement funds invest for perhaps 40 years before they retire and 30 years after they retire. You absolutely want to bias your investments towards equities or stocks. BUT, you don't need to buy stocks directly to do this. You can buy a no load stock mutual fund or stock index fund. This message board does not have lots of financial advisors, mostly there are accountants, tax preparers and a few lawyers. You probably want to find some confirming sources for the guidance I have given you. That means you will need to devote some time to reading financial magazines and the material for beginners that mutual funds and brokerages offer. You don't need to hit home runs every year to be a successful investor. Walks, singles and a few doubles is a winning strategy. For you, this means finding investments that get you reasonable long term results. Three steps: (1) get started, (2) pick a basic no load fund that broadly covers the stock market, and (3) allocate some time to learn more about investing. Don't over think the procedure. You will know twice as much two years from now and a lot more by the time you are 30. At that point, you will hopefully have more than 25k in retirement funds and can consider other options.

All 5K in one account at one custodian? Someone should have caught that. Call your custodian immediately and ask for the IRA department. There are proceedures for correcting the problem and it is still timely. You will probably need to draft a letter explaining what you did and ask them to calculate the earnings of the over contribution. Note, $3500 is your legal limit if you are over the age of 50.

Etrade is a reputable online brokerage. My childrens Roths are at Etrade using a couple of no load mutual funds. If you elect email statements (or something like this) you can avoid annual fees. You will have thousands of investment options in mutual funds, plus stocks at Etrade. You don't purchase "for" your account... you purchase within your account. Contributions are made in cash for a Roth. You can remove contributions at any time for any reason. Removing earnings is different. If you need some guidance on initial investments, you can search this message board using key words like "started", "beginner", "index funds", etc. OR, post again!

IRAs or Roth IRAs were created by Congressional legislation to encourage retirement accumulation. Think of the IRA as the envelope use for mail. Lots of things can be put inside, the envelope is just a container. So it is with IRAs. Savings accounts are advertised as "safe" and "insured" - this is very misleading information. While you are not supposed to lose your initial principal with Federally insured accounts, there is a bigger risk. The bigger risk is that your savings will not grow sufficiently to meet your future needs, or will grow sufficiently to overcome the erosion of value from price inflation. Right now, some savings accounts have yields that are not even 1/2 the rate of inflation. You need to spend some time educating yourself about the general concepts of investing. Besides money markets or CDs, your investment options include stocks, bonds and mutual funds. Let me jolt you. I am guessing that you are very young and in the early part of your working career. If this is true, I would suggest that you should invest 100% of your retirement assets in a no load stock mutual fund.... one that can go down in value. Why? Because investing in the stock market is a wager on the future, growth and our free market economy. The stock market goes both up and down.... however, there are many more up years than down years and the best up years blow away the worse down years. Over the long haul, equities (aka stocks) tend to provide a return of around 10% a year. Time is an investors friend. Over the long haul, the trend for equities is up. You are likely to be investing for many decades, so just ignor the short term movements and stay with the plan. A simple recommendation: call Vanguard or look them up on the web. This is a mutual fund company with many choices including a number of index funds with very low costs. Read the materials. Be sure to ask them for anything they have for beginners. A mutual fund is another kind of "envelope"... a company that buys a bundle of investments (stocks, bonds, etc.) and when you give them money you own a small part of their portfolio. When you buy a mutual fund, they do the "juggling". Someone just getting started does not have sufficient expertise or enough assets to effectively own individual stocks.... probably doesn't want to spend the time studying companies either. I suspect the above recommendation to invest in stocks might scare you. You fears are due to a lack of basic knowledge about investing. Dedicate some time to reading Kiplinger Financial, Worth, Money or other personal finance magazines. Post again if the above is not clear or if you have additional questions.

Some clarifications: First, Bird is completely correct about diversification. While you can get narrowly cast single industry (often called sector funds) or just large or small size firms (often referred to as the "cap" as in capitalization or the total value of all shares) or just dividend or just growth.... even these have some element of diversification. Shifting to a general stock fund or something like an S&P500 index fund... here you have a tremendous amount of diversification. Just because you may have three mutual funds does not mean you are significantly more diversified because of the substantial overlap of holdings! Second, $1000 does not need to be diversified. This is a modest amount - for some people, just one weeks salary. Initial contributions to Roths can be a hurtle for some folks starting up, especially for folks who have just entered the work force. Some mutual funds have a lower or no initial amount if you sign up for a regular automatic contribution from the checking account. Another option is to set aside the amount you can invest and add to it and when you exceed the initial contribution - then open the account. Why NO LOADS - because they perform well and you don't lose a chunk of your funds to commissions, and you can readily change investments. Making a mutual fund selection does not require a PhD in mathematics or business. Almost any general purpose, broadly diversified stock equity NO LOAD fund will work. The Vanguard S&P500 is a classic choice because of the low annual expenses.... but ther are literally hundreds of good choices. You can find many covered in financial mags. Consumer Reports each March looks over the field and highlights about 100 good funds and explains the basics with layperson language. I am not sure where you got the "three mutual fund" information. Some folks are very happy with just 1. I remember reviewing the records of one person who had 30+ funds and did not know much about any of them. For the next few years you will be OK with just one fund. Keep it simple. When you accumulate 50% of a years salary in the first fund, consider choosing a second fund. What most concerns me is that you have a daughter-in-law but are apparently just getting started with retirement investing. Don't worry about the number of funds, focus on getting more money invested.

You should get a copy of IRS publication 590 which covers many issues you have raised. Answers in brief follow: 1. What does it take to qualify for a Roth IRA? First, you need to have earned income. I will assume that you now file a seperate tax return and that the type of income you have is "earned" rather than pension, dividend, capital gain, interest, etc. If you do not exceed the six figure income threshold, you are eligible for a Roth. There is no age cutoff. 2. Is it possible to start contributions to a Roth IRA this month, December, or is there an earlier cut-off date requirement? (I read something about a mid-April date but wasn't clear on it's significance.) I am not sure I understand this question. You can contribute in a lump amount at any time during the year, or systematically such as with an automatic monthly check, or at various times. You have to April 15 of next year to make the contribution for 2004. 3. In 2005, is it correct that I wouldn't be able to open or make a contribution to a Roth IRA until/unless I began working again? You can make the contribution before you start working, but you must eventually have earned income during the year. That income could come next summer and you still could fund your Roth in January. 4. The woman told me I couldn't open an account because I was retired. Retired? I don't think this concept has any meaning for a Roth. If you have earned income, you may qualify for a Roth, regardless of age. 4. What constitutes "retirement"? Good question, but I don't think it is relevent to your Roth decisions. 5. I am not currently collecting social security but if I were to do that when I turned 62, would that preclude me from opening/contributing further to a Roth IRA? Don't know, maybe one of the tax advisors can answer this question. 6. Basic question about the Roth IRA account. Each new year that you make a contribution, does it go into the SAME Roth IRA account or might individuals have many different Roth IRAs? You choice. There are practical reasons for having one Roth, such as minimizing annual fees and keeping management simple, but there are no IRS rules governing number of Roths. Note, the maximum contribution is fixed by your circumstances and you can not put in additional funds because you have three Roth accounts.

I moved your question to a new thread. It will get more attention here than on page 2 of something that has been running for a while. First, you may be retiring in 10 years, but you are likely to be deploying your Roth in investments for a lot longer. You could easily live 20 to 40 years after you retire and your retirement assets must be invested to keep you ahead of inflation. On the day you retire, you don't want to go 100% to cash. Because you are age 50, you can contribute $3,500 to your account and if your husband is at least 50, another $3,500 to his. Then in January you can make contributions for 2005. (assuming that you qualify for a Roth in both years) No one can tell you the best investment for the next 20+ years. However, equities (aka stocks) have done very well over the long haul and it might be possible to average 10% annual returns. Investing 7k each year for the next ten years and getting a 10% return would build a Roth nest egg of about $110,000. Note, the maximum contributions will move higher so you might be able to achieve a better result. You did not say anything about your academic education or investment experience, but I will assume from your question that you are a beginner investor too. To begin, you need both a custodian (who tracks your investment, choices include brokerages, banks, and mutual funds) and an investment (I suggest you use mutual funds). Not just any mutual fund but a NO LOAD fund that has an annual expense rate below 0.5%. There are perhaps 10,000 mutual funds, you initially only need one reasonable choice. Two catagories come to mind: some type of S&P500 or whole market index fund, or a general stock fund. NO LOAD means there is no front end or exit commission charged. You might also want to look for a custodian that has an annual fee that does not exceed $25... search on annual fee if you want to go further on that topic. The "I'm new to Roths or investing" topic has come up a lot in the past. One feature of this site is that you can do a search and see previous related responses. For example, click on the ones below that addressed starting a Roth. http://benefitslink.com/boards/index.php?s...5233&hl=started http://benefitslink.com/boards/index.php?s...5411&hl=started http://benefitslink.com/boards/index.php?s...4759&hl=started http://benefitslink.com/boards/index.php?s...t=0entry77697 http://benefitslink.com/boards/index.php?showtopic=24759 http://benefitslink.com/boards/index.php?showtopic=22096 http://benefitslink.com/boards/index.php?showtopic=24151

Disclosure: I did two substantial conversions in 1998 when I could keep our join income low, pay the taxes over 4 years and I had some very good investments that rapidly grew the Roths. So far, the conversions have worked for me but I am an outlier. The comment from fairmark is a generalization - and I would disagree with it. Tax rates can be significant. For example, if you were to retire to a lower tax rate state or one of the states with no income tax, you would be probably better off not converting as a California resident. If rates are equal on both ends, conversions vs no conversion should be very close to a wash. I would also suggest that predicting future tax rates is very difficult. Only 6 years have passed since the Roth conversions started - and how many of us expected 15% long term capital gains taxes and 15% tax on dividends? Probably none, not even the average Republican. Over a very long period of time, folks often fail to comprehend the potential magnitude of their nest egg in future years. Contrary to all the doom a gloom in the media, there is a very significant probability that a college educated person will accumulate more than a million in retirement assets, and quite a few will built a multimillion nest egg. Because many folks lose their deductions and have paid off the mortgage by the time they retire, they can have tax rates similiar to their prime work years. You absolutely need to spend some money and get advice from a financial planner, maybe even two planners. Be very cautious about developing a personalized spreadsheet - I have seen too many spreadsheets with agregious errors in logic, typos, etc. There are many scenarios where the conversion may look good. Also, a hybrid approach is often attractive because it gives you flexibility in placing your investments (IRA vs Roth), planning your withdrawals (Roths have not set schedule, IRAs do) and estate planning benefits. You could aim for small annual conversions to avoid tax bracket creep, but the regs could change, your income could eliminate your eligibility, or your could marry. It is fairly likely that ROTH and IRA rules will change a few times. They already have. Changes in the regs can cut either way and nearly impossible to predict. I hope you don't mind uncertainty.

Qstipps, Below is the time series for the ICA mutual fund, 1934-2002. You don't need to do very sophisticated analysis to note the large number of years where the return exceeded 15% and the few negative years. To build a spreadsheet, you need to be able to write formulas such as: =IF(B4<1,$I$3,G4) to check for a negative result and determine a substitute value. Then just compound the series and compare the new series to the unadjusted series. The web reference below gives you a 50 year time series for S&P500 which shows 13 negative years (worse -26%) and 37 up years (best +52%) and a 50 year annualized return of 10.96% - and it is unclear if that includes dividends. Nearly half of all years exceeded the 15% gain (24 observations) that would have been the cutoff mentioned at the begining of this thread. http://www.mutualofamerica.com/articles/Ca...03/SandP500.htm ICA Mutual Fund Annual Return Including Dividends 1934 18.2 1935 83.1 1936 45.8 1937 -38.5 1938 27.6 1939 0.8 1940 -2.4 1941 -7.4 1942 16.8 1943 32.8 1944 23.3 1945 36.8 1946 -2.4 1947 0.9 1948 0.4 1949 9.4 1950 19.8 1951 17.8 1952 12.2 1953 0.4 1954 56.1 1955 25.4 1956 10.8 1957 -11.9 1958 44.8 1959 14.2 1960 4.5 1961 23.1 1962 -13.2 1963 22.9 1964 16.3 1965 26.9 1966 1 1967 28.9 1968 17 1969 -10.7 1970 2.6 1971 17 1972 15.9 1973 -16.8 1974 -17.9 1975 35.4 1976 29.6 1977 -2.6 1978 14.7 1979 19.2 1980 21.2 1981 0.9 1982 33.8 1983 20.2 1984 6.7 1985 33.4 1986 21.7 1987 5.4 1988 13.3 1989 29.4 1990 0.7 1991 26.5 1992 7 1993 11.6 1994 0.2 1995 30.2 1996 19.3 1997 29.8 1998 22.9 1999 16.6 2000 3.8 2001 -4.6 2002 -14.5

I saw your requests - about the model. Right now I am immersed in a series of investments involving crude oil tanker companies. If you are interested, you might want to check out FRO and SFL... no advice given, but the 2 year chart sure looks nice. I did not design the model for outside users, so let me look at it some more and think about what I can do. The model is nothing fancy, just a 69 year stream of historic results and a set of simple options to toggle the max allowed, override on negative results, set a minimum performance and a couple of columns to do the resulting compounding.

This kind of big fish eats small fish happens a lot. Since the firm is currently privately held, the acquisition may have done you a big favor in both kicking up the value of the stock and liquidating your position. When you said you "don't have any choice", I suspect that they are referring to alternatives to cash out or liquidation. The lack of a choice in that case would be related to the terms of the buyout agreement. The little fish is not publicly traded so the SEC is probably not involved. It is unclear from what you said that after the company changed procedures about what subsequent investment options would be offered. You did not indicate if the new company is privately held or publicly traded. I am hoping for bigger firm, publicly traded... since you are likely to have better investment choices. The continuation of the tax shelter is a completely seperate question. I would expect that the acquiring company will have some kind of plan were you can roll the funds and then make new investment choices. You should never have to be in a position to get paid off in cash. Any liquidation of shares should occur within the 401K and the proceeds should be able to be in some way redeployed. You may also have the option if the plan is terminated to roll over the funds into an IRA of your choice, then take charge of your own investments. Your old and new management have a fiduciary duties to protect your interests. That includes preserving the tax shelter of the 401k and giving you a fair price for the stock. . While there is a chance the new firm wants to kill of the old plan, they have an incentive to encourage you to move to their plan because you would increase the asset base and potentially reduce their overhead percent. There is a lot of money at stake here. If you have doubts about the options you are presented or the proceedures that the company says they "must" follow - then find yourself a good financial advisor and possibly a good attorney.

Sometimes the plan continues as is. Sometimes, the plan is merged into the acquirers plan. It all depends upon the initial agreement... and sometimes that can change after the deal is done. Your employer will probably hold meetings to explain your options. You may be able to elect to roll the funds over into and IRA, but that may be specifically prohibited by the terms of your plan. You can contact the HR dept and ask them, but don't be surprised if it takes a while before the two companies have worked out the details. IF you wife has stock options outside of the plan, they may be immediately vested and you may be required to exercise or lose your options. Just another thing to think about if she has any company granted stock options.

If your two sons have earned income, why not consider opening up Roth IRAs for them. Just take the IRA distribution and use it to start Roths. There is no age threshold, but they need to have earned income... if not in 2004, you can try again in 2005. Paychecks are not the only way to qualify.... newspaper routes, babysitting, snow shoveling... any work that generates an income would qualify. Dividends and interest, however, are not counted as earned income.

UGLY UGLY UGLY I drove accross the country to get back to Colorado and had some time to think about the fund that limits upside but erases negative years. I have now set up a spreadsheet to evaluate these kinds of proposals. I can change the assumptions about negative years, install a mimum performance, change the max earnings percent, substitute other data sets, and compare proposals against the classic buy and hold strategy. I currently set up the model with the 69 year history of ICA, a loaded mutual fund that began in 1934. I could readily load the S&P500 or DOW data, but I thought this fund represented a slight bias towards large cap growth stocks which I believe is appropriate for long term Roth/IRA investing. This fund averaged 12.7% over that time period and the performance included 12 down years and 57 up years. Three times they recorded back to back negative years. Data from this fund is used for illustrative purposes only, I specifically do NOT recommend it. (past performance is not indicator..., it is a loaded fund) Preliminary results: Putting a limit on your upside potential is definitely a fools wager. Accepting a 15% cap in performance affects 36 years using ICA data, over half of the years! Over the 69 years, the classic buy and hold approach produces 8 times more earnings then an approach with a 15% ceiling and no down years. The CB&H is 4 times better than a product that offers a minimum of 3% annual but imposes a 15% annual cap on earnings. Now subtract fees, sales commissions, termination charges, and annual expenses..... ugly, ugly, ugly. The benefit to the company offering the "safety" is huge. The investor gives up a tremendous amount of earnings for assurances of no negative years. I ran about 20 different scenarios and found none that were better for the investor than the long term common stock porfolio. You give up a massive amount of money for "peace of mind".

You did not indicate if the funds are with the same custodian or covered by the same brokerage. I would talk with the customer service dpt for Roths at the destination fund. Transfers and conversions are best done as a direct custodian to custodian transaction where no checks are ever sent to you. You probably have to complete a one page letter of instruction and a one page form for the new custodian. Hand it in to the destination custodian and they will do the work.

A good idea Joel. The web reference looks like it was supposed to be a summary and it is not easy to understand a complex set of options from a very simple outline.

I know very little about annuities and the specific investment... and since I am on the road (recovering from my daughter's wedding) I just glanced at the web reference. My general reaction is that I don't think this approach is all that great. There are many years when the stock market goes up over 15% (see following comment on 7% vs 15%) and you won't participate in any of the upside beyond 15%. You are a very young guy. You should be thinking about investing over a very long term. Good years out number negative years by about 5:1 and the best years are huge (about 2 in ten years the gain is above $35% for funds with a slight bias towards growth). I think if you understood more about investments and the risk/rewards you might not be excited about the idea your mom has suggested. The web reference is pretty confusing. It looks like there are multiple catagories. Did I read it right that some of these have 2.5% and 3.5% annual asset fees? If true, that is really ugly and would be a reason to deep six the idea. You may not be understanding the "caps" and how they apply - it sure looked to me like the 15% referred to a 2 year period, because there was a reference to 7% being the max cap for a 1 year equity. If the max is 15% in two years or 7% in one year - then you are talking ugly ugly ugly. Did you note there are also early withdrawal charges? Thats another negative. Earnings are credited at the end of the year or end of two years? That clips more from the potential return because you are not compounding for the full period. Another negative - an inexcuseable approach that it sure looks to me like they are just trying to slip by consumers. Keep in mind that I am no big fan of annuities and don't like complicated insurance products that imbed all sorts of extra features.... but your web reference had what you might call "double speak". It is hard to know what you are actually getting. I am against extra charges, limitations on switching, high annual fees, and all sorts of shell/pea games aimed at selling your "peace of mind" but giving you meager performance. You mom is suggesting a pretty awful Roth IRA selection. It sounds to me like you need to devote some time to understanding investments. If you would devote 2 hours a month to reading books or magazines you would have a good start. You might want to see if there is a local college offering classes. Some of the websites for brokers and mutual funds have good tutorials. You might also find a local investment club useful. There are many ways to learn - find the approach that works best for you. One of the big trends in investing is "self help". The number of options where someone does all your thinking for you are declining and getting more expensive, while the number of do-it-yourself options are both growing and, with the emergence of the internet, getting much cheaper. The crux of this is that more people need to learn how to manage their own money and make their own investment decisions. Those that do will benefit substantially from the huge array of choices. If you feel the primary issue in investing is never taking a loss, then your concept of risk and reward is way out of balance. The web reference investment is like buying a 2005 Lexus that only goes 10 mph. You are embarking of a multi-decade trip and that car is not going to get you where you need to go. I am not encouraging you to take on extraordinary risks and roll the dice with each investment. But someone who will be investing for many decades needs to understand the difference between short term risks and long term results.

A reply to DH003: Your statement that Vanguard requires $10k as a minimum initial investment is incorrect. For virtually all of Vanguards funds, the minimum is $1,000 for IRAs/Roths and $3,000 for standard taxable investment accounts. The only exception I know concerns Vanguard's health care fund where the minimum is $25k for all accounts. (This health care fund has booked an average annual gain of over 19% for the past 20 years, the holders are probably not complaining.) I don't understand the "Vanguard and Fidelity don't play nice" comment. These are two of the big mutual fund houses in the US. You are talking Coke and Pepsi - two very large firms that are direct competitors. They each have over 100 funds that cover virtually every angle of investing.... value/growth, bond, L/M/S/micro cap, tax exempt, domestic/international. Since each has an offering in almost any conceivable area, I am not sure why they should offer access to other funds, much less encourage placement of funds with their number one competitor. Both firms have commented on how often investors become bewildered with the choosing from 8,000+ mutual funds. As consumers, we don't expect VISA to be "nice" and help us with transactions at Mastercard. At least I don't. The trend in mutual funds has been to increase automation, expand NO LOAD offerings, expanded reporting, and skinnying down the annual expenses. Many decades ago most fund choices were fully loaded funds and annual expenses were hidden. Due to a combination of consumer pressure and SEC regulation, there is better communication, more competition and greater choice for funds. The recent issues with mutual funds have concerned in / out swings by institutional accounts and other favors for institutional customers. Greater transparency mandated by the SEC and demanded by consumers will eventually erase this problem. Fund families have a huge economic incentive to play by reasonable rules. Those funds or families that diverge see a net migration of capital.

I have had experience with lots of brokers. They all have plusses and negatives. Things to consider: annual fees for IRA/Roth, options to waive the fee by asking or balance size or other business or automatic statements (Etrade waives fee if you use Email), convenience of a local branch, quality/readability of statements, range of investments available. The error rate across brokerages of fund families seems to be very small, under 1% and is not a factor in selecting. The bigger the assets, the less important minor fees become... so when you past the 50k level the annual fees are just not a big factor. You are not likely to get Vanguard through another outlet, or if you do the fees will not be the lowest. Vanguard deals directly to keep costs down. Many mutual funds pay a fee to any broker that "sells" you the fund.... not the old style 6% commission, but a small service fee. Eliminate the broker and you can keep expenses lower is the theory that Vanguard uses. Everyone should be aware that Fidelity has gotten tired of being undercut by Vanguard and now offers a series of Spartan mutual funds where if you initial purchase is over $10,000 the annual fee is 0.1%. Isn't competition wonderful. Vanguard has been a leader in low cost mutual funds for decades. Finally, a major fund house wants to take them on. I have been told that Etrade was something in the 0.09% range.... but I have not seen this in print yet. There is nothing wrong with a index/bond split of 80/20, but if you are just getting started the first $3k can go anywhere and you can select another fund in later years. Your annual fees may be higher if you split up you assets into multiple funds. One other caution, many funds have substantial overlaps in holdings. Just about every fund has some Microsoft, Intel, Home Depot. The bigger the fund, the more likely they have these holdings. If you have four funds but they substantially overlap, you are not really diversified. Stock index vs bond is virtually no overlap. Another way to minimize overlap is to choose by market cap (big, mid, small and micro are common designations) or growth vs value funds. All of the above is dirrected to fund families and brokers connecting you to funds. I have assumed that you are primarily talking about NO LOAD funds - commissions are a problem both in terms of the bite they take and the incentive to sales persons to steer you to the place where they make the most money. If you want to talk about stock brokerages for trading individual stocks, post again. There are many issues that are narrowly related to this activity: quality of execution, access to analyst reports, structure of commissions, ease of access, etc. I have used about a dozen different brokerages over the past 20 years. They come in all shapes, sizes and specialties. I don't just use internet discount brokers. I use different brokers for different types of trades.... some of the higher cost brokers are worth their extra expense, some are used only for special types of trades. One shoe does not fit all.

It sounds like you expect to be qualified to start a Roth and contribute for two additional years. You may not be able to qualify in subsequent years, but that initial Roth continues to compound for many years. Three years at the max is 9k, but you would hope that those funds would double about every 7 years or grow to about $512k in about 42 years. Double that number if you both contribute to Roths for the next three years. When you no longer qualify for contributions, you still have a great retirement investment vehicle started. You don't "switch" investments. Rather you just start a new mechanism, depending upon your circumstances. The Roth can continue to work for you. I would not avoid a Roth just because you have a new choice in three years. Are there better investment strategies? Not sure about better, but there are many ways to invest for the future. If you own a business, you may be able to set up a pension/profit sharing account that can set aside about 25%. If you work in a corporation, you probably have a 401k or thrift plan that may involve a match. School teachers (probably not with these salaries!) can usually contribute to a 403B. Each method has different qualifications, maximum contributions, possible matching contributions, subsequent taxation, etc. It sounds like you do not have an accountant. If not, you should consider finding one and getting some tax advice on retirement/investing and general taxes. Don't wait for the next filing date when everyone is busy. Start looking around now and asking other professionals who they use. You are likely to spend a few hundred dollars, but often the advice you will get can be worth many thousands. [and I am not an accountant!] You can also find a lot of books at any good library on retirement planning or investing. Let me put in a good word for "standard investing". That old fashion buy and hold strategy. When you buy and investment and hold it for more than 1 year, you get very favorable tax treatment.... lower long term capital gains taxation. Many of the retirement tax shelters treat distributions as ordinary income (not Roths) which means that taxable investing for long term capital gains. Investing in a retirement account that will eventually be taxed as ordinary income may be less attractive then investing in a taxable account and paying LTCG. The keys to building substantial assets include: (1) managing your expenses so that you can set aside a substantial sum each year, (2) educate yourself about your options, (3) find one or more suitable mechanisms (Roth, IRA, 403b, 401k, standard investing, pension/profit sharing, etc.) and (4) sticking to the plan.

Married and will be filing jointly. 2004 AGI about $75,000, bachelors degree (in Accounting) and an MBA. If these are your circumstances for 2004 and 2005, you are eligible to start Roths or do a one step or two step conversion. The benefits of conversion are complicated and are often based upon weak assumptions about future income, tax rates, and even the state in which you will live in future years and its tax policy. My parents taught me the value of saving, so I've always saved as much as I could. My 401(k) with my current employer (which is at Vanguard) is a little over $21,000. Around 50% of it is in small cap stocks funds, 30% in an index fund, 10% in a foreign equity fund, and 10% in my company (DuPont) stock fund. I'm currently saving 15% of my salary in my 401(k). Sounds like this 21 is a separate pool of retirement assets. The mix of funds looks ok, I am assuming that these are all in low expense Vaguard options. The 401(k) with my former employer (the $31,000 that I mentioned in my first post) is invested at Securian in roughly the same asset mix. I don't know anything about Securian. You need to read the 401k documents from the prior employer to determine the circumstances under which you can do a rollover. You also should review the performance and fees/expenses of Securian. However, I've not done much investing outside of my 401(k)...I've done very little investing in individual stocks (just a little in my former employer's stock through the employee stock purchase plan). For the Roth, should I take the time to educate myself on which stocks to invest in, or should I continue investing in mutual funds? Investing in individual stocks takes more time for research and tracking. You also have the problem of a narrow base if you only hold a few stocks - the diversification issue. The third issue is how well do you tolerate ups and downs - some folks prefer the mutual fund appoach. Mutual funds give you "instant" diversification and you can bias your portfolio towards growth or more conservatively towards bonds or dividend paying stocks, while keeping your research and tracking time committment manageable. The two paths (funds vs individual investments) can both achieve good results. Which you choose is more related to your interests, available time and more control vs simplicity. If you are raising a family and starting a business, I might put off the individual investing for a while. If I go with investing in individual stocks, can I use Ameritrade? Or some other broker? Any recommendations? Can a broker do the conversion process from 401(k) to traditional IRA to Roth IRA? There are many choices for brokerages, and many of the internet based (or internet supporting) ones are good. Etrade, Ameritrade, ScottTrade, TD Waterhouse, Schwab, etc all have plusses and drawbacks. If you live in a city that any offices related to these, that might make a difference. Also, are there any other options besides mutual funds or individual stocks for a Roth IRA? I'd like to think through all of the possibilities before I proceed. While there are some other options, I think you should restrict your choice to either funds or individual investments until you know a lot more about investing. My thought is that during retirement, depending on what the tax brackets are, I can minimize my tax burden by taking money from my current employer's 401(k) up to one of the lower tax brackets and then take money from the Roth IRA. You can probably convert to a Roth this year or next given your filing status and income. BUT, it is not clear that you should convert to a Roth. Do not assume that because you can convert that it is a great idea. In many cases, both scenarios are similiar. It is much better to do a conversion in a year when your income is very low such as if you wife stops working to raise a family. It is better to do a conversion if you know that your income is likely to go much higher in the future (when you become a partner in a law firm) and your future tax rates are going to be much higher. Conversion might make sense if you are looking to avoid minimum annual withdrawals. Often, a hybrid stategy (partial conversion) gives you many of the benefits without the killer initial tax impact. Do NOT do a conversion without the benefits of you accountant or tax advisors advice. Oh, one last thing...my wife and I recently launched a small home-based business... Good for you. You will learn a lot. If this idea does not pan out, try something else. Owning a business increases your chances to make some serious money. You did not use the word "aggressive" in your second post. That is probably a good thing. A lot of successful investing is grinding out a decent return each year and letting time be your ally in building assets.

You are to be commended to be thinking about investing and your options at your age. And commended more for the success in accumulating significant assets. Many questions - let me address a few. First, you have not given any indication of your current income or filing status. You need to satisfy the income and filing status guidelines to consider a 401 to IRA to Roth conversion. If you do meet these requirements, both this year and the next, then you could do 1/2 conversion in each year. However, qualifying in one year does not mean you will automatically qualify in the next. Second, you said " I'm looking for the most aggressive investment for my Roth IRA that I can find. My goal is to earn as much as possible in the Roth IRA, since I won't be paying taxes on the gains." What do you consider aggressive and why do you think you need to be aggressive to reach your goals? Part I - What is aggressive? For planning purposes, a lot of folks use a predicted average 10% annual return. Using your $31K and age 32.... these assets would grow to about 1/2 million by age 60, or one million by age 67 if you averaged just 10% a year. That is growth of just the $31k, no additional contributions. Now add your likely contributions over the next 30 years... I don't know what the assumptions would be but you could probably equal the accumulation of 1/2 to 1 million if you kept contributing. While these future amounts do not take into account inflation, you would have substantial retirement assets before counting any pension or social security income. Part II - Is 10% reasonable? I think the answer is yes. I would actually argue that 10% is not at all aggressive. I would expect you to average 10% if you had a mix of 80% stocks and 20% bonds with the stocks slightly biased toward growth (less railroads and utilities, more technology or medical). I am not talking betting the farm on biotech, internet, dot.com or any gadget investments. I would agree with you on many points, including that you have a long time to go before you will be drawing down upon your IRA assets. But, when you ask "where to invest" and follow-up with a comment on being aggressive, I get a little concerned. Perhaps is a semantic issue. I would not classify owning index funds as being overly aggressive for someone age 32. If you understand the general concepts of stock market investing and have a long term view, I would be supportive of owning a modest portfolio of individual stocks... but you would need to commit a lot more time to research, analysis and tracking of individual stocks. Age 59 1/2 - this is a regulatory distinction regarding IRAs. It is rarely a significant date for individuals. Some folks retire earlier. Some continue working for much longer.... because they enjoy their jobs, need the money, have few non-work hobbies, etc. If you have been reading other posts on this message board, you probably realize that your investing life does not stop at the age you retire. Someone who stops working at age 59 1/2 may live for another 30 years. If you get extremely cautious with your retirement assets, you may not stay ahead of inflation. I would like to know a little more about you before posting some suggestions. I am hoping you can post a little about your approximate income, marital status, tax filing status, academic training and investment experience. (My daughter is getting married in less than a week, but I may be able to post again when I am not running around on chores!)