John G

I hope you are comfortable with the answer from Barry and me. You have a lot of flexibility on how many dollars to convert, when you convert and how many times you convert. (Note, there are limits each year to how many times you can un-do or reclassify a conversion back to a regular IRA) From my side, however, I sure wonder about where the first, second and someday potentially third IRAs are coming from. If these have been started by you as contributor IRAs, I don't see any advantage in not just contributing to a Roth in the first place. If these IRAs are coming from some kind of corporate rollover of retirement assets, then it makes more sense. Every few years you get leave one employer keeping the retirement assets sheltered, moving them into an IRA your control, then converting that IRA to a Roth.

This message board is probably the most definitive source for asking questions about IRAs and Roths over the entire web. Barry Picker is a USA authority on Roths and been posting here for years. I have been specializing in Roths since they 1998. There are many experienced tax preparers, accountants and tax lawyers who will post replies on this message board. Your best chance for getting information is to clarify your original post here. Your second best source is IRS Publication 590, which does not directly address your question, but covers conversion rules. I think you are misunderstanding some element of the Roth rules or procedures. Neither Barry nor I could originally conceive of a reason why you would want to take the route you suggest and make what should be a one step process into a two step. Your certainly not going to make any custodian happy with the paperwork. At this point, I am begining to think this might have something to do with a divorce decree and the differences between "Roth" and "IRA". I have trouble understanding why you want to be mysterious about your question. This message board aims for clarity about IRA/Roths. Technically the answer to your question is that you can convert an IRA to a Roth many times and every year that you meet the income and filing status requirements to qualify. But both Barry and I were reluctant to post this and mislead other readers into thinking your proposal was normal. There is a practical communication issue you need to understand. As one of the moderators of this message board, I have a responsibility to about misleading the average readers. Folks waste enough time trying to understand the basics, they should not be left hanging on some issue. If you can't clarify the question, I will have to close down this thread because folks could be mislead into thinking this was common practice.

Sounds like a misunderstanding of the mechanics. You are suggesting a two step process when a direct contribution to a Roth is simpler. If your IRA grew during the year, you would pay taxes on the conversion on anything over the contribution... hard to see why that is a good idea. I too am interested in the "angle". Please post again.

I normally do not make a specific suggestion to someone who posts a question, but I make an exception to a beginner who can easily be overwhelmed with too many choices and new terminology. I think it is better for a beginner to have some confidence that they can take the plunge, then wait and wait until they understand everthing (I am still waiting for that day myself). In the "beginner" period, the first five years, it is more important what you learn about investing than your actual results in my opinion. This guy will be dealing with investments for perhaps 70 years. In responding to DH's post: - almost all major brokerages and large mutual fund families offer screening tools to evaluating mutual funds..... these will be better understood by someone with a basic foundation of investment knowledge (ie. someone who knows was "cap" and "blend" means) - Fidelity does indeed have a huge array of mutual funds and they have been slowly moved by market competition to reduce fees and commissions. But lets look at the details of the FREEDOM YYYY funds because this is no silver bullet solution to retirement investing. The FIDELITY FREEDOM 2040 and the other retirement year clones are a recent marketing angle to attract investors with a new device... time managed asset balancing. The "gimic" is that they slowly change the mix of investments, getting more cautious as you approach the target retirement date. Many companies offer them, but I am not especially impressed. Why? Well these are funds that hold other funds (2040 currently holds 18 other Fidelity funds) and so you get administrative overhead for the primary and all the subcomponent funds. (see gray below) The 0.91% expense fee for the 2040 version is over .70% higher than many large index funds. Lets look at the impact of that number over 35 years making some simplifying assumptions. If a taxpayer contributes $3,000 each year for 35 years to a Roth and places these assets in FREEDOM 2040 fund earning they might earn 10% and build a nest egg of $813K. But FREEDOM 2040 is basically a big company (big cap) blend (both value and growth) stock fund ..... sounds a lot like a diversified large cap index fund to me. Can we do better with an index fund? Placing the same $3,000 each year into diversified large cap index fund with the same performance, but with about a 0.20% annual fee might give you an annual return of 10.7%. The index approach would grow your nest egg to $955k. That is 17% more than the Fidelity fund of fund option. The difference is about $140k caused by reducing the "overhead" or annual expenses of the fund. For advance mutual fund investors... all things being otherwise equal (they rarely are, but go along with me) you are better off in the long run with the lower expense ratio mutual fund. If you believe that on average the managers of 18 different mutual funds at Fidelity can stay 0.70% ahead of the index portfolio than the Fidelity fund would be superior. Neither I nor DH know in advance which path will produce superior results. The index approach tries to be superior by keeping costs down and taking just a tiny amount away from average performance. The Fidelity actively managed fund tries to get a superior result based upon spending money to make superior stock picks. An often cited, but rarely documented, statistic is that index funds on average beat 80% of the actively managed funds each year. This means that about one in five actively managed funds can overcome the administrative overhead handicap they give away to computer driven index funds. I know a few managers like Billy Miller have rather regularly beaten the S&P500... if you can determine how to find these mutual fund winners - great. But for the average investor, keeping the largest percent of the performance of the overall stock market is solid approach to Roth investing. Choosing either approach is very likely to complete crush the results of relying on CDs or moneymarket accounts. From Fidelity's website: Expenses for FREEDOM 2040 Combined Total Expense Ratio 0.91% Their definition: The combined total expense ratio reflects expense reimbursements and reductions and is based on its total operating expense ratio of the fund plus a weighted average of the total operating expense ratios of the underlying Fidelity funds in which it was invested. This ratio may be higher or lower depending on the allocation of the fund's assets among the underlying Fidelity funds and the actual expenses of the underlying Fidelity funds. Disclosure: My wifes 403B is with Fidelity, and we participate in their Charitable Gift Fund. They are a long standing, solid and reputable company with a wide range of products. My comments above relate purely to the mathematics of performance, not the underlying companies.

Responses: 1. I would take $3,000 out of your cash reserves and fully fund your Roth. You can tap into these funds in an emergency. Yes, keeping a reserve is wise, but your Roth can serve as part of that reserve. This solves the minimum amount to open problem and gets you full invested for the year earlier. 2. Age:22 and single! Assets:1993 accord Actually your assets include the 20k, but I am not going to split hairs. Frankly, you deserve some fun years of the social scene, outdoor/vacationing and those first electronics! And, in the recommendation below, I am going to emphasize an easy care investing option so you don't spend too much time on your "future". 3. Education:graduated last October with a Bachelor's in Computer Info. Systems - sounds like you should expect good salaries and upside opportunity. We never seem to have enough computer literate people. The common thread through my entire career was always being able to get things done on computers - application side. 4. Risk toleranace: low - middle - What? Well, after you learn more about investing, you will understand this question better. Time is your friend. You should bias your investments at your age to growth stocks... but you need confidence in your investment choices to do that... so a modest start is called for. 5. Goal:I would like to be able to retire early... a home 2-5 years from now... Ideally, I would like to have other investments to fund my early retirement. - - all fine ideas, but I suggest that your first get started with your Roth first. You can take money out of a Roth to buy a home... but I would not normally recommend this, especially with someone with your earning power. 6. Debt:$36,000 in school loans. I make double the minimum payments. -- what is the interest rate on these? If it is very low, pay it off slow. If you have any other debt, like credit card, it is likely to be at a much higher rate. Generally, you want to accelerate the payment of expensive debt, not the low interest kind. 7. I currently have $20,000 in a savings account(.55% interest) - - some of this money could be put into a higher yielding account or into some staggered CDs. A problem to tackle after you get the Roth started. You might want to put $5K of this into easily liquidated bond mutual fund. 8. My current job has no benefits -- think about the search for your next job as starting one day after you start employment. Have your resume ready. You should always be ready to respond to opportunity. Jobs with no benefits? You might be able to do better, if not immediately, then certainly after you log a year of experience. 9. I have found 4 investment companies - - You don't need 4. I am going to suggest that for the next two years you adopt the KISS approach to your ROTH. Call Vanguard or visit their website. They are a great company and in many areas an industry leader. Start a Roth with them and choose one of their boardly based INDEX funds. Their staff can help you and the website has a lot of info on which to base a decision. The annual fee is very low. The annual expenses (which reduce returns) are extremely low at Vanguard. This is a simple start, and it will do a great job for the next few years. You will probably find that if you use the monthly option, you can start at a lower amount... but I am suggesting getting started for the full monty of 3k. All of the ones you listed have fine investments, don't get hung up over the choice 'cause it is getting going is the hurtle you want to overcome. 10. Education did not end with the degree. Welcome to the world of investing. I am going to suggest that you can learn a lot more by reading Kiplinger Financial each month than some of the course you took in college. The $15 per year subscription compares very favorably to tution too! This magazine seems to aim for the 20-35 year old salaried person. Good coverage of credit, home buying, car buying, travel as well as mutual funds, stocks, Roths and investing. You are asking the right questions. Here's to you, may you have a colorful future! Good luck and post again if you have other questions. I just got off the phone with my age 22 daughter who has her first apt in DC and it was interesting to here many of the same points from here.

A Roth or IRA is like a fish tank.... you can buy the fish tank many places, it is what you put inside that makes it special, and you can have many kinds of investments in the container. Who offers the containers: banks, mutual funds, brokerages are the three most common. What can be the contents: bonds, CDs, money market accounts, mutual funds, and stocks are the most common types of investments. Returns: The 8-10% is a conservative range that folks often use for planning purposes. Your actual annual return can be negative, equal to the rate of inflation, 8-10, or higher. Returns depend upon what you choose for your investments and what time period or snapshot you use. It sounds from your post that your are very new to investing. You did not include any information about your age, other assets, education, risk tolerance, goals, etc. so it is hard to offer specific guidance. Perhaps you can post again with some additional background. Generalities about annual returns: basic savings and money market accounts right now are below 2%, CDs vary with length but might be 4-5%, bonds range from 5 to 10%, dividend yielding stocks roughly 2.5% to 6% for just the dividends, REITS (real estate trusts, a type of stock with a high payout) from 5% to 10% for dividends, blue chip stocks 8-12% annual over a long haul but could be negative in the short term, and growth stocks 10-14% long haul but could be negative in the short term. There are exceptions and outliers to all of the above. However, in general terms, annual returns are low when risk is minimal and returns increase as you assume greater risk or volatility. For example, a CD for 4 years might over a 4.5% return and you principal is guarenteed by the governement. That return is very predictable and relatively safe.... except that it may not keep up with inflation. You won't build much of a nest egg at 4.5% Many begining investors start with mutual funds. You buy shares of the mutual fund and own a tiny fraction of their "portfolio" which is likely to be some mix of stocks and bonds (there are almost 10,000 mutual funds and lots of different styles). The benefits of owning shares of a mutual fund is that you can buy in $$ amounts and you get diversification (owning a wide range of investments). Example of mutual fund investing: I like to use ICA because they have been around for 69 years and produce great performance graphs. Between 1934 and 2002, ICA posted 12 negative returns including a -38% and six other double digit losses and twice have back to back down years. Yikes! BUT, they posted 57 years with positive gains including +83, +45, +44, +43, +37 and a total of 42 years with gains over 10%. The long term average annual compound rate of growth over the 69 years was 12.7%. That is very good performance... and 69 years is a decent long term snapshot. How would you make out if your IRA investments followed this path? If you invested $3,000 each year in a fund earning 12.7% you would have the following: 25 years $445,640 30 years $829,546 35 years $1,527,530 and you would double all of the above if your spouse did the same each year. {Note ICA is a loaded fund that charged a 5.75% commission in the first year. I would not recommend them, but use them as a example. In today's world, a no load fund is likely to be a better choice. A 12.7% annual return is slightly above average for stock mutual funds but, in my view, would represent a reasonable long term result for a fund slightly biased towards growth stocks. For planning purposes, most folks use the 8-10% annual return which is more conservative.}

"only the truly high net worth people have $50,000 in a taxable account as well. " I sure would not start at 50k to define high net worth people. It is not just the assets but the depth of the relationship. And, 50k is no magic number. Ya' just need to ask for the waiver and do basic consumer comparison shopping. The waiver of IRA/Roth annual fees is not just a function of taxable account balances. Most custodians that offer this feature allow any linked account that total to $xxx and that threshold has at times been as low as $20k. So, a family with $15 in taxable and two $20K IRAs would very likely qualify. It is rare to find someone older than age 35 that would not qualify at some institution for no-fee IRAs. The key is to ask for the waiver. A final note. No-fee is not necessarily the dominante issue. Convenience, investment options, research support, access to mutual funds, allowed investment options, web technology, executions (how good a price you get on trades) and commission schedule are also very important. (In many areas of investing folks are single minded about commissions when trade execution may be a much bigger and hidden cost.)

Even when a brokerage or mutual fund says they have an annual fee - don't accept this on face value. High asset accounts can be exempt. Families with other business ties can be exempt. Anyone who has set up a monthly contribution plan may be exempt. It often pays to just flat out ask for a waiver of the fees, because IRA money is highly prized because it stays with an organization longer than many other accounts. To keep your business or to encourage you to bring more business, some firms will waive the fees. How tough or relaxed a custodian is on fees goes in cycles and is often more driven by competitive pressures than actual costs.

Some, but not all, custodians allow for the annual fee to be paid by outside funds. Since this is an allowed activity, I suspect that some custodians just don't want to bother with mailing notices and processing checks. I have never heard of any mutual fund ever allowing expenses to be paid for with non-IRA funds. Imagine someone with $300k in a mutual fund with expenses of 1.5%... if you could write a check for expenses then you could cover the $4,500. If the reader of this thread has experience with a mutual fund that allows you to cover expenses with outside funds, please post the name and phone number of the fund. I will follow up with them. Concerning Tocqueville mutual funds: They charge $15 annual fee per IRA type account with the max fees if multiple accounts of $30. The annual fee can be paid by non-IRA check or from the IRA account. They do not allow investors to pay "expenses" outside of the account. One of their advisors said "expenses are an imbedded cost and there is no option for special external treatment".

The above references to prior discussions covers a lot of ground. You will find some of my posts for beginners in the mix. If you don't think something is covered - then by all means post your questions. There is no ideal answer to investment timing or investment choices. When your teachers refer to NOW, they probably mean procrastination is bad and over the long run equity investments do well. You can't prove the future, but it sure seems like market economies and capitalism work. (I get into some great arguments with my daughter about that... the one who spends the gains) I applaud an 18 year old wanting to get started and that you might have more than 3k to invest is amazing. Besides fully funding your Roth, you can always have taxable investments in some type of brokerage account or mutual fund. But, I have two cautions. First, you say nothing about education and frankly, education is likely to be a huge factor in your future financial success. Second, you should always have some rainy day cash held in reserve for a lost job, car accident or other unpredictable event. At 18, perhaps your parents are part of your backstop. A few months living expenses or paychecks might be a start for you. I would highly recommend that you spend $15 for an annual subscription to Kiplinger Fiancial magazine... it covers a lot of financial topics for folks in the 18 to 35 year range.... buying cars, loans, credit cards, college expenses, career advice, etc. There is not single book in a college bookstore that I would put ahead of an annual subscription in terms of practical info for young adults.

You may get a better answer if you define the asset, the custodian, your investment experience and if you have any direct or indirect relationship to the asset.

If the person is close to 59.5 they may have a lot of interesting opportunities. Money is basically on sale right not (my often repeated mantra). You can arrange for a home refinance, reverse mortgage, magin borrowing on equities, signature line or bridge loan with very low interest rates. Spanning a couple of years via some loan mechanism to avoid any penalty issues is pretty easy to arrange.

S&P relates to Standard and Poors (spelling?) which is one of many info services that tracks the markets. There are also index funds related to the DOW, Wilshire 2000 and 5000 and "total market". Generally, one group makes the list and mutual funds and brokerages use "the list" to create an investment portfolio. This field is growing because index funds often outperform many managed funds. Not all Index funds are the same, especially if you are accessing via a broker and getting a different class of shares. Vanguard, as the creator of these investment options originally, has ultra low annual expenses, last time I looked it was below 0.20%. Some "clones" are 3x that rate and hope you don't notice. Scwab, Etrade, Fidelity.... many of the internet brokerages also have search/sort capabilities for mutual funds. If you are just getting started, you may want to send you money directly to a mutual fund family. The brokerage approach may offer some conviences, but may add some extra expenses.

You need to understand that no one can tell you that one mutual fund will perform better than others... frankly that is not the question you should ask. What you are looking for is a broadly based (not sector specific, or company size, or value/growth, or international) fund that will give you reasonable performance over a number of years. You only need one such fund for perhaps the next 10 years as you slowly build your assets. Having two eventually is fine, but initially there is no need. I suggest you narrow the field using the following: only NO LOAD funds (no commissions), must have been in existance 10 years, very broad stock coverage, and annual expenses below 1%... preferably way below 1%. You might want to look at the various INDEX funds available through TD. Index funds are computer managed (rather than actively managed by analysts) portfolios that often have very low expenses (under .25%) and will mimic market performance. Vanguard more or less created these types of mutual funds, although many are now offering something similiar. I am not sure if the versions that TD offers will be as attractive as some of the options you have if you make a direct purchase.... you need to read the summaries of a few. Money market accounts? Right now they pay very little ~ a few percent at best. If you want to have your retirement assets grow, you need to lean more towards stock mutual funds. While there are no specific performance guarentees or "insurance", over a long period of time you should do much better than any IOU type investments.

Yes, $100 is a small amount, but good for you for getting started. You can contribute in a variety of ways: single lump, monthly, or periodic payments. It is totally up to you, subject to your qualification in any year and the maximum amounts. (Contribution decisions can be changed over time. You do not have to make the same contributions each year.) Contributing a specific amount each month has some advantages. Some custodians will waive the annual fees if you adopt an automatic program. This approach is often called "dollar cost averaging" because you are buying more of your investment when prices are down. It is critical that you put your IRA dollars to work and get them growing. Your goal should be to grow your funds faster than the rate of inflation erodes their buying power. Some of the common investment options include: stocks, CDs, bonds, and mutual funds. Each of these catagories have different risks and likely results. Anything that is close to "risk free" will typically give you a crappy return. Over the long haul (many years), stocks (or mutual funds based upon stocks) will generally yield a higher return. Since you are just getting started, I would suggest you consider a broadly based stock mutual fund, perhaps a low cost stock index fund. TD Waterhouse has many options to consider - if you have trouble with their extensive web site, give them a call. You are probably looking for one mutual fund that will be just fine for many years. Consumer Reports (March issue every year), Kiplinger Financial magazine, Worth and Money all have articles on mutual funds that may aide your choice. One problem you are likely to run into initially is that you only have $100 on deposit. Some funds require $500, $1000 or higher for the initial investment. Keep making contributions and when you reach that level you can make your first investment.

TY - well said. Derelict - good reference, thanks for posting. The option question comes up a few times a year at this message board. I will push beyond TY's comments and say that option trading in a IRA account is probably not suitable for 98% of the folks who post on this board. Option trading requires a much higher level of sophistication, discipline and monitoring than that of the average taxpayer who posts here. It is sort of like comparing a baton carrying hurtles relay collegian to a weekend jogger. If you don't understand or can't answer most of the following questions, you are not ready for prime time options trading: 1. On what date do most stock options expire? 2. What is the maximum duration of LEAPS? 3. In terms of options, what does the phrase "going naked" mean? 4. When can an American stock option be exercised? 5. What option strategy is similiar to a stop-loss order? There is no "magic" in using options to make money. Some folks use options as a form of insurance, to create income or to acquire stock. They are one of the many tools and investor can use, but because of leverage, higher commisions, wider spreads and expiration dates they require a more sophisticated investor. From my experience, the learning curve for investments is something like this: 1x for mutual funds, 2x for individual stocks, and 4x for options. To the original poster: You did not indicate your investment experience or knowledge about options, so I gave a generic answer. IRA rules on options are more driven by the brokerage than by IRS regulations, which is why you see some variation. Since only a small percent of IRA holders ever use options, the brokerages risk little business by having a very restricted list. A main concern is that some options have unlimited exposure which is not compatible with a restricted account (limited ability to add funds). Anyone interest in textbook plunging for more information might find Listed Stock Options by Carl Luft and Richard Sheiner to be useful... 200+ pages of theory and practical info on put/call, strangle/straddle and LEAPS. It is very dry and tedius but comprehensive.

TY - I agree, probably not a good idea. And have many of the same questions you have posed: income, level of debt at what rate and payment, Roth amount, etc. If the debt is student loans - ussually you have prefered repayment terms that are very attractive. I would never repay a student loan - consolidate yes, and put it on a monthly auto pay so it hits your checking account each month automatically. Credit card debt? - money really is on sale right now. Almost everyone is receiving offers to roll over credit card debt getting 3-12 months zero % financing. Auto loans - most auto loans are structured to have a higher interest component in the first two years and therefore it rarely makes any sense to pay off an auto loan early... in fact, it may trigger extra fees. And I especially concur with TYs point - what caused the problem? If you don't address the cause of the debt, you are likely to have future problems. While it is generally desireable not to have debt, a modest level of debt may be completely appropriate. A prudent home mortgage, medical expenses or a student loans come to mind. Bad debt is anything based upon either high interest rates, compulsive spending. You left us guessing on what might be your circumstances.

I concur with Derelict and Jevd - when doing conversion math, all IRA accounts are treated as if there is just one big account. You can't cherry pick just the already taxed components. Also, you convert dollars even if you move specific assets from one account as part of the conversion.... all the math is done on the dollar value of the assets on the day the conversion occurs. Partial conversion - I was contrasting partial to a full or complete conversion. A partial conversion may be very attractive because you are controlling the tax impact and you may find that some mix of regular and Roth assets is optimal. For example, a full conversion in one year could boost your marginal tax rate whereas leaving some IRA assets would give you a smaller stream of required distributions which might be taxed at a lower rate. There might be implications to estate planning as well. You might be able to due partial conversions in a couple of years from what you said about income changes. There are some downsides to planning multiple partial conversions including: Congress changes the rules, you don't qualify in subsequent years, your regular IRA account increases substantially in value and conversion becomes more expensive. Deciding about the benefits of conversion involves making some guesses about your future life, tax policy, investment earnings, your health, etc. While there are "calculators" that you can find at the sister website (www.rothira.com), you should get a tax accountant or preparer familiar with your circumstances involved. As that person to give you the possible downsides. Your current assets are substantial and will continue to grow in the next few decades. You don't spend everything in the first year of retirement... so you will be investing and growing your assets for perhaps 4 decades. Your point on taxes mirrors my view. My best scenario is that they stay constant. My worse scenario is that state and federal max out at about 50%. It may seem ridiculous to you at this point.... but it is conceivable that your assets might reach $30 million. The "Rule of 72" applied at a 10% compounding for 35 years gives you five doubling periods or 2x, 4x, 8x, 16x and finally 32x. You might be closing in on 4x when you are 62, so you would have more than two decades after retirement when you assets would likely grow beyond your annual needs. Which leads me to the conclusion that while you are crunching the numbers for a Roth conversion, you should also be thinking about estate planning. (the first thing you should do is make sure you have at least a basic will and that you have designated beneficiaries - primary and secondary - on all of your retirement accounts) You really need to find a local tax pro who is familiar with Roths, conversions, estate taxes and investment projections. You may need to interview three or more people to find someone highly qualified. I spent about $500 when I did my conversions in 1998 and my accountant and I were breaking a lot of new ground to figure out the math. It should be a little easier to find someone with experience today - ask how many conversions they have done, what professional seminars they have attended, the software they use and the estate planning lawyers with whom they work. (maybe some of our accountants can suggest other ways to find professional help) Your current assets and your "trajectory" are likely to put you in an enviable position of having a wide array of lifestyle choices. When you choose to retire, the throwoff from your assets will probably exceed what you normally spend now. Good luck with your choices.

A complex set of questions. I will address only a few areas and leave the rest for the sharp accountants and tax professionals. (Your assets put you in a very solid financial position. Congratulations) "Which accounts can I convert to a Roth IRA so not to pay taxes on withdrawl at retirement?" Some clarifications: Any account that can be converted to a Roth will be treated as a Roth where withdrawals are not currently taxed. However, the amount converted will be subject to taxes in the year it is converted. The exact amount subject to taxes will depend upon the mix of deductable, non-deductable and investment earnings in the combination of all IRAs that you own. You don't control the math by picking and choosing to convert from only certain accounts. Should you convert? This is an extremely complex question. There is nothing magical about a Roth conversion - it can often be a "wash" because you future taxes are offset by conversion year taxes. However, sometimes a partial conversion makes more sense than a full conversion. Your sizeable assets are likely to grow into multiple millions before you reach your mid-60s. You did not indicate when you are expecting to retire, your current income/tax rate, your state of residency, your possible life expectancy, etc. It seems likely that you have non-retirement assets that can be used to pay Roth conversion taxes, but that is an assumption on my part. A Roth conversion looks better if you currently live in a state that has no income taxes, but may retire to a state that does. The conversion question is made more complicated because you have to make assumptions about future rules and tax rates. It is wise to run the numbers now when you might qualify. You conversion mathematics are likely to be complicated and the size of the assets are significant - therefore you should seek the advice of an accountant or tax professional BEFORE you take any action. Because I am travelling, I can't elaborate further. Your questions are good and your specific facts and circumstances will likely dictate the best path.

I praise your looking ahead and considering starting a Roth IRA early. You qualify by meeting the combination of income and filing status tests EACH year. However, once any year qualifies and the contributions are made, those funds are "inside" and are not impacted by subsequent income qualification. So, you should qualify and contribute the $3,000 (or more when the annual max increases) each year until you no longer qualify. Those funds can stay invested in a Roth account until you decide to withdraw them. Subsequently, you will have a range of retirement investment options available, depending upon which type of structure you choose for your practice. Because these can be more complicated and can involve larger contributions, I suggest that down the road you find a financial advisor who is familiar with physician financial planning.

I have extracted some comments on mutual fund selection from a Motley Fool email I received today Quantitative: 1. number of years a manager has been at the helm 2. the track record compiled during #1 3. tax efficiency the fund (note not an issue for IRAs) 4. expense ratios 5. risk and volatility metrics Qualitative criteria: 1. fund's strategy (negative comments about top-down macro econ views) versus criteria for stock picking 2. against dramatic moves into and out of equities - market timing is almost always a loser's game 3. managers who make their picks based on an assessment of each company's underlying fundamentals. Typically, that involves an emphasis on the balance sheet and a company's ability to generate plenty of free cash flow (FCF). A focus on successful product lines and ample market share is another key component, as is a deep-seated belief that, ultimately, it's earnings growth that drives a company's stock price. 4. in favor of patient penny-pincher managers 5. Keeping an open mind, many investment styles work....no dyed-in-the-wool value hound... not married to a traditional kick-the-tires kind of investment process 6. Discipline of stock pickers. A fund investor's most important job, after all, is to assemble a solid portfolio that provides exposure to the market's various market caps, industries, and styles. I post this as food for thought when a novice thinks about the differences between actively managed funds and index funds. The above advice is pretty decent... and it points out a wide range of criteria for selecting an actively managed fund. Motley Fool have advisory newsletters and alerts to sell. They also provide a lot of stuff for free. If you visit the Motley Fool website you will start to get emails. They are colorful writers and on generic advice tend to be spot on.

If you deducted the $1,000 for a contribution to a regular IRA, then you need to file an amended tax return. If the contribution was to a Roth or a non-deductable regular IRA contribution, then you need to contact your custodian and make sure it is listed as a 2004 contribution ~ these two possibilities would not require an amended tax return since there is not tax deduction. For all readers! Stay out of this kind of problem by not putting off to the last minute contributions to any retirement account. Some folks make there contributions the first week of January which has the added benefit of giving your money more tax sheltered time to grow. For all readers Don't assume that your custodian posted any transaction correctly. You need to check your statements to confirm dollar amounts, tax year designations and investment choices.

I sure hope you have a good reason for pulling from your personal tax shelter. Money is essentially on sale right now. Interest rates are extremely low. Everyone wants to refinance you home, sell you a car with zero or low interest, give you a line of credit, or provide a credit card with no interest owed for many months. If you have a short term need, you may want to consider these options first. An awful lot of adults regret taking money out of a Roth, IRA, 401k or profit sharing plan. You can't always count on qualifying for these tax shelters, or having the funds to contribute. Most options have restrictions on the amount you can contribute in any year. Congress may change the qualifying rules at some future date. For all of these reasons, I urge you to think a lot before you pull funds from a Roth.

I hope you understand that no one can accurately tell you which of these three funds will perform better over any time period. Nor that any other fund will out perform these three. All that said... these three are reasonable choices in that they are no load and have a slight bias towards growth which makes sense given your long hold period. All three have been around long enough to demonstrate some capabilities... although past performance does not directly indicate future performance. The annual expense ratios on these three are 1.06 to 1.28% which is a little higher than I would prefer. Fidelity and HR also have fairly high turnover of their portfolios. These are small criticisms. If you went to a mathematically managed index fund, you could reduce your annual expense to 0.17 to 0.40% range. By picking these funds, you are saying that active management will more than cover the 0.6 to 1.0% gap. Most actively managed funds can not year after year overcome that annual disadvantage. Note that HRTVX and Fidelity overlap in their area - small companies. Good luck with your decision.

Sun, Micron, Home Depot and Amgen - while I don't follow these companies, they are well known names and the bias is toward large "cap" (capitalization ~ large size firms) and toward growth. The stock prices of these four have been moving sideways for much of the past year. Frankly, you might want to just keep them and continue to monitor how they perform. I agree with much of what TY has posted. Yes, you could sell them all off if your commission structure is low... but you might learn more by keeping them and learning about these 4 companies. Additional contributions should probably go into mutual funds. There are thousands but you only need one. First, I would only look at NO LOAD funds ~ these have no front end or exit commissions. Second, I would select only from funds that have annual expenses below 1% as expenses erode fund performance. Third, I would choose a broad based fund ~ something that invests across all industries. Because of your long holding period, slanting the investment slightly towards growth is a good idea. No hyper growth, but a little more computer/med devices/software/telecom etc. rather than railroads, basic metals, paper and utilities. You need to see what kinds of funds Ameritrade supports ~ look at their website and use the search capability. One class of funds that will generally meet all of the above characteristics will be INDEX funds. Index funds are based upon some "list" (like the S&P 500, all NYSE companies, the 5000 largest firms, etc.) and use a personal computer to make buy/sell decisions. That means there are no field visits, no "analysts" and less portfolio turnover.... all of which leads to very low annual costs (often well below 0.5% per year). Consumer Reports, Kiplinger, Worth and Money often run articles on various mutual funds. Don't chase the top performer ~ it often performs poorly in the following year. But, do consider the objective or focus and 5 or 10+ years of performance (while no guarentee of future success) sets a benchmark of what you should expect. Ameritrade says this: "Mutual Funds Ameritrade offers more than 11,000 mutual funds, including major fund families such as Vanguard, Franklin, Janus and Putnam. This diverse offering covers an array of investment objectives, goals and strategies — so you're sure to find a fund that fits your investment needs." I think as an accountholder you will see more info than I do as a visitor. Again... don't worry about your short term success. While it is nice to see your portfolio gains, what you are learning about investing is a lot more important for the long haul.