John G

You description is not very clear. On the one hand you refer to a "paycheck" and on the other you talk about grants. If you have a paycheck that includes taxable income and has withholding for SSN and federal income tax, I think you are covered. However, if you are getting a stipend you may not be covered. As a former holder of a governement fellowship that helped to pay for grad school, I know that what is taxable and what might be considered earned income can get very obscure. You may want to talk to the dept or central bursar to get some clarification.

Just another reason to not wait to the middle of April to contribute to your Roth IRA. If this had been done 6 weeks earlier, the error could have been corrected in time. A note to all readers, in this modern era where banks charge huge fees for bounced checks, why is anyone using an account that does not have overdraft protection or a simple line of credit backing it up?

1. You can't write off losses in a Roth or regular IRA account in the same way you do with taxable accounts. While you can close all your IRAs and then claim the loss, that just wouldn't make a lot of sense for the numbers you posted. 2. Consider this loss as one of the many times you will pay "Tuition" while your are learning about investing. You probably paid out a lot more for college credits that you may never use. 3. There are no instant great investors. There are no perfect solutions to investing that always work. Building up investing knowledge is a multi-year process. 4. I suggest that you start a program of spending 1 hour per week reading.... Kiplinger Financial, Worth, Money, or the Wall St Journal. That's four hours per month ~ you will be amazed what you will learn in a year. 5. What are the three stocks? Why did you buy them? What do you know about the companies? Post again on this and I will give you some suggestions... it is not clear that you should change course just because of a short term result. 6. Be prepared that your Roth will go up and down in value. Think long term. Do not make changes based upon short term events. 7. I would have started you out with NO LOAD mutual funds. Anyone with less than 30k (some would say 50k) can not invest in single stocks efficiently. It is hard to get a diverse portfolio. Research stocks takes a lot of time, and more time to track your holdings. Even with internet trading, transaction costs are too large.

For most folks, I think the answer is that you soldier on. Unless your losses are extraordinary... like a few folks who road the dot.com craze until they were wiped out... were it might make sense to close out your accounts and take the lose. But, once you have built substantial assets you would not typically do that because of one bad year. It would be like starting from scratch to assemble tax sheltered assets. If you have a balanced portfolio or broadly based mutual funds, it is rare to have a long down stretch. We just came out of one that ran slightly over 2 years. That has happened I believe just three times in the past 90 years.

On the medical front - I hope you are listening carefully to your doctor. There are both Rx and lifestyle changes that will help you. for my "rainy day" savings i will use a ING money market account(maximum $5000) Don't know ING, but most money markets are a safe place to park cash. The key problem is that you might just get 1%. You should probably have a larger "rainy day" amount, while 5K is a good start a 6 month reserve of about 25K might be your target 4 years from now. Those assets can be in cash, money market, Roth (since you can withdraw funds), or for some folks a bank line of credit or margin on equities. These funds are what you might have to tap if you lose your job, have a medical expense or need to replace a car. Reserves are needed so you don't have to liquidate something to solve a short term problem. i will set up an IRA and max it into a growth and income. i will keep it there just in case i do endure. Good. It looks like your will qualify for $3,000. Growth and income is just fine, generally this is a mix of income producing stocks/bonds plus some growth company stocks. now for the mutual funds. i see these "fund of fund accounts" that do all the diversifying for you, Vanguard Target Retirement 2035 Fund is an example. they look great on paper but how are the real world results??? Fund of funds are a relatively new invention and one that I think is more marketing hype than real use for investors. First, any general mutual fund will give you reasonable diversification. Second, some of the F of F have two layers of expenses and that erodes performance and this double hit is often well hidden. Why take a F of F when you can get what you need with just one fund? For example, either the Vanguard 500 or total market index funds will do just fine. Skip the sector stuff, skip the international. You don't need them right now. as of now i want to stay away from watching the stock market 24-7. Understood. Folks that watch the markets too closely often trade or change allocations based upon the headlines and 24 hour TV news cycle and can hurt their performance. It is my experience that following the "herd" is often not as good as being a contrarian (going against the conventional wisdom). Time is you friend as an investor, think long term as in decades. One of the benefits of owning a broad no load mutual fund is that you come close to leaving it on auto pilot. You can look at the statements once a quarter or even once a year. (except you should always check that contributions get posted and that purchase/sell actions are reflected in the statement.) The average Joe does not need to be thinking about investments 24/7. Does your employer have a "thrift" plan, profit sharing or ESOP? These are other investment options besides the 401k. Any employer match program is usually a good way to boost your investment results.

DH003, the 60 days have lapsed and I welcome you back to the message board. As I have asked before, please drop the tag line "billboard" for your ideology. This is a message board of information to users who post questions. Rants and political posters are best suited for other web areas like Yahoo.

Some points: - Your conclusion that "you have to live past 60 to reap benefits" is completely incorrect. There are lots of ways to systematically invest for the future - both via tax shelters and just buying and holding long term. There are lots of folks that have been able to amass over a million dollars by the time they are 55. Lets just use the Roth option - if you start right now and invest the max each year for 29 years and average an 11% return by focusing on a stock portfolio with a slight bias towards growth companies you will have over $750,000 when you are age 55. If you also have a company program or other investments, a $1 million level is possible. - You can always removed contributions to a Roth IRA without penalty. You can establish an regular IRA withdrawal plan for pre-59 1/2 but frankly you might be able to live off other assets to bridge a few years. - Roth limits are going to rise in the coming years, but the prior comment that you are not likely to be able to achieve your goal if the contribution is $3000 or $5000 is probably correct because your are talking about 20 years of compounding. - Yes, do look into employer based plans as you can set aside more per year AND the employer will often match your contributions. - If you are self employed or own a business there are many options for setting aside more money each year. A lot more. - Roth investments can include individual stocks, bonds, mutual funds, CDs and money market accounts. With a 25+ year horizon, you probably will need to consider equities (aka stocks) since the expected return is higher than IOUs like CDs and bonds. You might want to ask your custodian what materials they have about "how to invest". You library has lots of books on the subject. I highly suggest that someone at your age subscribe to Kiplinger Finance magazine as it targets its articles towards 20-30 somethings and often has interesting stories about people who retire early. - Retiring early can be accomplished by amassing significant assets. But another approach is to keep your "needs" simple so that your expenses are modest. I was advising a exec a decade ago who said "I NEED an income stream of $500,000 to retire". This guy ended up working an extra 8 years when he could have been enjoying a wonderful life earlier, all because he had let a lifestyle of spending money control his decisions. - Yes, you may want to consult with a financial planner to explore your options and develop a plan. You can accomplish some of this by reading - think about setting aside 1 hour a week to read about financial planning. That is about 50x more than the average person your age does in a year. - Lifespan: Have you talked to your doctor about this? Medical advances in the next twenty years may change your prospects. When you were born, bypass surgery was just becoming a standard proceedure, MRI and CAT scans were a research concept, no one had even started mapping DNA and I you were not supposed to shoot a laser at someones eyes. I am intrigued by your circumstances and thinking. Please post again with additional questions or fee free to email me.

Congratulations on starting a Roth at an early age. You will learn a lot in the next few years about investing and you have taken the first step in building wealth. I would not recommend buying either stocks or bonds - because with $2k you can not be diversified. Diversified means a range of holdings. When you only hold one or two stocks, you can suffer greatly from a plunge in one of them. Individual stock/bond ownership makes more sense when you total assets grow beyond $30,000. You should review the types of mutual funds that Ameritrade supports. Ameritrade does not show visitors to their site a list of available funds, so you will need to do some digging. Their website suggests thousands of funds are available, you are looking for just one right now. (Next year you may use the same one or find a second fund.) A fund solves the problem of diversification and you can deploy the full $2,000. I would focus on NOLOAD funds, the funds that do not charge a initial or on-exit commission. I would look for a fund that broadly covers the stock market and that has a annual expense ratio of less than 0.5%. A stock index fund may work well. I noted that Ameritrade does mention Vanguard funds - that group is known for index funds. What to look for in a fund at your stage: NOLOAD, low annual expenses, broad coverage of the stock market, suitable for a $2,000 initial purchase. After you buy the fund, get on with your life. Nothing is likely to happen fast. But you are hoping that in less than 7 years, your assets will double. When you are 60 years old, this initial contribution of $2000 should have grown to about $128,000. If you take a disciplined approach to investing an put $2000 in each year, and average about 10% a year in appreciation, you will be a millionaire in your 60s. Good luck. Post again if you have additional questions. Final note, don't worry a lot about "performance" right now. What you learn in the first few years is more important than the results. I hope you are also investing in education as well. One final suggestion - buy a subscription to Kiplinger Financial magazine for about $16 - it is an excellant source of info on funds, stocks, careers, loans, buying a home, buying a car, etc with a good match to the 18-30 year old audiance.

A few additions: Roth contributions are never deductible. Yes, you can fund the Roth of someone else. When I teach my JA class "who really wants to be a millionaire" which is all about Roths, I suggest that students talk with a grandparent or aunt/uncle as see if they will match them to get started. It's a fun class where we get to talk about "The Millionaire Next Door", the Rule of 72, no load funds and index fund investing. I take the most skeptical kid and walk through 49 years of compound growth. They are ussually stunned with the result. These HS seniors are often very surprised by the response they get from a relative as well. I have funded the first few years of four folks - it is a great thing to do to introduce a child to the adult world of money. My sister's two daughters. The daughter of a cousin. And a single mom in the neighborhood that has been struggling to raise two great kids. Roths are a great tool for teaching about investing.

Some custodians have designed their software to be able to answer this question. You might try calling your custodian and ask them if they can provide any assistance. I won't vouch for the reasonableness or defensibility of their approaches.

If you have two incomes that when combined give an adjusted gross income of less than $150,000 and you are filing a married filing a joint return, then each of you can contribute $3,000 (or more if your ages allow the additional the $500 make-provisions) to a Roth IRA. Note, the maximum amount you can contribute is scheduled to increase in future years. Also note, you must meet the income qualifications each year. The qualification in the first year does not carry over to future years. While there is no anticipated change in the income qualification rules... these could change in future years. Conclusion: you do the math each year and apply the rules that apply for that year.

Yep. Although sometimes it takes an attitude re-alignment to realize this.

FundK: Married filing jointly completely qualify if adjusted gross income is below $150,000. But, there is a partial qualification between 150k and 160k <--- this is a really nit picky rule that has very little impact beyond making the IRS harder to explain... and as it is after midnight when I am writing this I got to say it sure seems goofy to me.

A reminder on Roth eligibility: Tax filing status sets the maximum adjusted gross income to qualify for a Roth. These are often overlooked when folks say you just need earned income and meet the income limits. Which income limits? There are three: "Married filing separately" has a max AGI of $10,000 - which just about kills off the Roth... unless you are so poor that you qualify, but don't have the funds to contribute! Single head of household threshold is $110,000. Married filing jointly is $160,000. And, just because Congress and the IRS want to keep things very simple... of course there are phase out ranges where you qualify for only a partial contribution. Frankly, the Roth rules could have been a lot simpler... but that is another story.

There are additional factors to consider. You might value having more funds in a Roth where there is no mandatory withdrawal requirements and there may be some advantages using a Roth as part of an inheritance. I think another possibility is that you become significantly more successful in the future and your income climbs to higher tax brackets. A friend I knew 20 years ago on the east coast is amazed that he know faces this problem - he was successful, his wife was successful, there investments did well - and eventually he will face a mandatory payout that will keep his income above 120k for probably the rest of his life. His kids are not longer around, the mortgage is paid for... and the tax bite will be big. I would suggest that both paths will work for you, and your crystal ball is just not accurate enough to predict which path is optimal. Make a decision, focus on how to best invest those funds and stick to your plan. Time is your allie in reaching your goals.

Jstorch, thank you for providing an update on your issue. This site tries to solve problems and answer questions for folks who post... but your last post helps with the larger issue of building the knowledge base of the casual visitors. I would imagine that many people who read this thread are wondering if they got the benefitiary designations on their IRAs. It is a smart thing to check periodically. One further note. There are some creative things that can be done with primary vs secondary designations. For example, each spouse can make each other primary and children secondary. Upon the death of a spouse, the surviving spouse can let the benefitiary designation take effect, OR the surviving spouse can decline to receive the funds... which means the secondary beneficiaries would rule. Some survivors may rely upon those funds for their remaining years, others may choose to let the assets flow to the heirs. Declining might be part of a strategy to mitigate inheritance taxes. Not many people are aware of this option. A final note: As one of the moderators of this message board, I was pleased to see that Pension in Paradise did find acknowledge that his first post was overly edgy. I also thought it was a little too emotional and judgemental. This site works best when we strive hard to understand the problem, communicate clearly and provide useful information. We are very different from Yahooland or the second vast wasteland - the average internet message boards. Thank you to both Jstorch and Pension in Paradise for getting the message thread back on track.

You also have a few days left (till April 15th) to fund your 2003 Roth if you qualify for that tax year. If you do, funding as much of 2003 as you can leaves the possiblity of contributing more than the $3,000. Automatic monthly deposits from your checking account can be set up with almost all custodians. There are many benefits: (1) committs you to a systematic investment plan, (2) has a dollar cost averaging component, you buy more shares when the price is lower, and (3) often custodians will waive the initial amount or the annual fees for someone who makes automatic monthly contributions. There is one minor negative, if you have the funds to front load your contribution, your money is inside the shelter a little longer.

I highly recommend that you see your tax advisor or accountant before you do the conversion to make sure you qualify and are doing the math correctly.

Day trading? Oh how easy that rolls of the tongue. The answer to your question has little to do with Roths and a lot to do with your personality, experience, available time, and investment savy. Lets answer the Roth part first: transactions in a Roth do not have to be reported line by line like in taxable accounts, there is no distinction between long and short term holding periods. That might sound like a perfect place for trading. BUT - -As a prior poster noted, you can not easily write off tax losses. Add to that limitations on options, inability to use margin, inability to short stocks.... But the bigger issue is that if you no very little about Roths, I would bet that you do not consume financial material - otherwise you would know Roths well. Folks that do not heavily consume data, reports and financial statistics are not likely to be good traders. That you are not aware of the full range of tools traders use, and how you can't use them in a Roth, suggests that you are not likely to be good trader. By every study I have ever seen, about 80% of all traders are losing money. For a few years, I was a trader. For a few years I ran a corp that focused on emerging companies and market swings. There was nothing in your post that even hints that you should be considering any kind of trading, much less day trading. Oh how easy it rolls of the tongue. Long term success in Roths is a lot like Notre Dame football of years ago. Each year (down) try to gain four yards (a 10+% return). And, this post is no April fools joke.

A clarification - you contribute cash to a Roth.... you can not contribute stock shares, bonds. You can take out contributions without penalty - they come out first. I am not sure if you are looking to have periodic payments now, or in retirement. Early in your life, you normally want to build the assets and keep everything compounding within the Roth. Later in life, you would eventually make an election (there are not IRS rules on age or minimums) to take distributions in lumps, equal payments, or whatever you choose.

No taxable event. There is no difference between long term, short term gains, dividends, or interest. No reporting requirements either. Just keep the records you need to track your results. Under normal circumstances, later in life, you should be able to take funds from your Roth without any taxes at that time either.

1. IRS code on IRAs specifies the income limits. Sure you can contribute early. It helps your investment grow because early contributions means the money has more time within the shelter to grow. If your income goes past the threshold, you can consider trying to take tax losses or asking an employer to defer a bonus to allow you to remain eligible. There are a number of very specific strategies beyond these two that might apply. But... if a year from now you realize you can not qualify for 2004, then you work with your custodian to back out the contribution... this happens often and they are likely to have procedures they will use. 2. Yes, a married couple filing a joint return can open two Roths for 3,000 each if they qualify. The earned income can come from either person. Each Roth would be an independent account in the name of the tax payer... there are no joint Roths. Did you contribute for 2003? If you have earned income and qualify by total income, you might want to start with a 2003 contribution. You have just over two weeks left to do this.

You can still contribute to a 2003 up until the date when your tax return is due - April 15. Because IRA departments get clogged in April, make sure that you get your custodian to post the contribution for 2003. And, you can also make your 2004 contribution at the same time. Subject to the usual caveats about earned income and adjusted gross income to qualify.

Hey mom and dad, how about adding $500 for 2003 or 2004 and you hit the magic 2k for Schwab? Initial amounts are often less if you sign up for a monthly charge to your checking account. You can also combine 2003 with 2004, or seek an IRA with a firm where you have other business. M&D - fully funding an IRA is a "heritage" type gift for your kids. You could suggest a matching plan. The initial dollar amount is rarely a hurdle if you think creatively about solutions.

Highly rated for what? You would probably go to different sources if you are talking about fees/costs, account features, range of investment options or fund performance. Can you post again clarifying what specific kind of info you are considering? Also note, by clicking on the "Plan Administration and Design" underlined text up the top of this page you will see that there are additional message boards for each of these two topics. You may want to shift you question to those boards or use the search function on those two message boards. If your question is mostly about performance of funds, let me give you some quick pointers. First, past performance is often a poor indicator of future performance of funds. For example, security/defense stocks and financial stocks have had a great run for the past few years. What is often a weak performer in one year often has above avg results in the following year... especially international and sector funds. Chasing fund performance often leads to below average results. Second, future performance of a fund is often effected by: change in fund manager, growth in fund assets (it is often easier to pick winners in a small fund, but if successful the fund will grow often making stock picking more difficult), and shifts in investment style. Third, read point one again!