John G

You indicated that the contribution occured in 2004. If you expect to have $3,000 in earnings in 2004, then your problem may be resolved by reclassifying the "year" you designated for the contribution. Errors on year designation are common (such as failing to put the funds in 2003 when contributions are made in early 2004, double contributions in one year, etc.). My experience is that many custodians just switch the designation. I am not sure if that has any legal issues, but it seems that "technical corrections" happen a lot. Try calling the custodian again and just ask them to change the designated year to 2004 and see what they say.

Fidelity (from their website) Fidelity's No-Fee IRA - No annual maintenance fee with an IRA Brokerage Account - for owning Fidelity Funds, individual securities, or any of over 4,000 mutual funds from other investment management companies, for both new and existing brokerage IRA customers. Fidelity has eliminated the $50 brokerage account fee for Traditional, Roth, Rollover, and SEP IRAs. Other fees still apply, including mutual fund management fees and expenses, low-balance fees and short-term trading fees on certain mutual funds, brokerage commissions, and account closing fees. When folks migrate away from high cost accounts, even the biggest firms like Fidelity take notice.

Vanguard Mutual Funds Vanguard charges a custodial fee of $10 a year for each IRA mutual fund account with a balance of less than $5,000. We automatically waive this fee if you have assets totaling $50,000 or more at Vanguard in any combination of accounts—IRAs, employer-sponsored retirement plans, brokerage accounts, and annuities. Minimum to open $1,000.

Charles Schwab (from their website) For Account Balance < $10,000 or combined household account balance -- Annual fee or Roths/IRAs is $50 payable in December $10,000 to 50,000 balance - - Annual fee of $40 Over $50,000 - - no annual fee Account opened years ago may still qualify for the lifetime waiver. It looks to me like after the dot.com bust and the decline in trading, all of the Schwab fees increase.

Etrade - no fees, but read the fine print below! No annual fee or minimum amount for IRA/Roths, conditioned upon acceptance of electronic statements and confirms. If you require paper statements and confirms, you can still open an IRA account through E*TRADE Securities, but it will be free only if you maintain a balance of $25,000 or more. Beginning in 2004, E*TRADE Securities will suspend the $25 annual custodial fee for Traditional, Roth, Rollover and SEP-IRAs for existing customers who accept electronic statements and confirms or have combined assets over $25,000 in E*TRADE Securities and E*TRADE Bank accounts. Other fees may still apply, including but not limited to mutual fund management fees, brokerage commissions, early withdrawals, and excess contributions. All fees subject to change, including possible reinstatement of the IRA custodial fee. Edited for space. Not an endorsement of this firm.

Etrade - not allowed unless 18 years of age Charles Schwab - allows IRAs/Roths below age 18, but some adult must be the guardian of the account, allows basic investments of stocks/bonds/mutual funds.

READERS - post your experience about fees charged by brokerages and any rules that enable you to have a lower fee structure. This can help readers save some time. John G - moderator

READERS: post your experiences as to who does and who doesn't allow minor children IRAs. This will save some folks time in finding a custodian. John G - moderator

There is no major problem with either scenario. The parent, grandparent, uncle can fund the IRA/Roth for anyone in the family. For that matter, I think there are no restrictions with a neighbor being the funding source. (my family has a lot of unusual links for IRA funding) If you are talking Roth (which seems to me to sensible in most scenarios) then there is no deduction issue for anyone. The deduction would belong to the child - and they rarely need it, tipping the math in favor of Roths. There are some minor problems (excuse the pun) for children IRAs. The first issue is finding custodian. Etrade for example will not accept a minor IRA. However, Schwab does. Some custodians will require the account to be set up as a custodial acct with a parent of guardiand taking charge. Each custodian will have a range of investments that they will allow. There is no reason to feel that you are restricted to just a local bank or that a childs IRA can not have mutual fund or stock holdings. Note, I am opening up an extra thread on this subject and asking folks to show some examples that work. The second issue is having a clear eligibility due to earning income - payroll is easy to document while babysitting, lawn mowing or a newspaper route are more difficult. Note, however, I do not know of anyone who got an IRS notice to prove earned income for a child's IRA.

It is hard to answer your question with the facts you provided. When did you establish this account? Are you trying to build up retirement assets? What is your age? Do you need these funds? You don't normally have a Roth IRA "though a job" so that part is confusing as well... are you sure you are talking about a Roth where you made contributions or is this some other kind of retirement plan? Do you qualify to continue making contributions to the Roth? In what are these funds invested? There are probably more Qs... I just wanted to give you a idea of some of the facts that are missing. Is your question just about reducing the annual fee? If so, you have some options. Although the account is small, some custodians will accept an account like this and charge a smaller annual fee. You can ask the current custodian to waive the fee, some will if you ask. You can ask the current custodian to waive the fee because of other business you have with them - many have exceptions for folks with other assets. You can move the account to a custodian where you have other business and seek the waiver. Yes, you can also close the account and under some circumstances you may owe nothing in taxes. But, that sounds a little like walking backwards. Most folks are trying to build their tax shelter assets. Post again and someone will try to give you an answer.

Why? There is not a great answer to why they structured the Roth limits the way they did. But, since you will soon be married, you live (and die) by IRS rules governing married couples. Perhaps the rules will be changed again and you can participate with a Roth in the future.

Supporting and clarifying Applebys comments: Roth qualification is something that happens each year. The result of one year has no impact on other years. Some folks also think they can't maintain a Roth if they no longer qualify to contribute. Not true. The mathematics of qualifying is on a yearly basis. Once a Roth is established, you may not qualify to add to it, but the Roth lives on. Congratulations on your success. Hopefully there are other tools like 401k, ESOP, 403B or pension/profit sharing that may help you build wealth. PS: Co-workers are rarely a great source for technical issues. I am happy you posted here.

Hopefully you have kept the data as a time series including the prior custodians. Almost all custodians list contributions by designated year on the monthly statements. If you don't have these, then look for your stored checks which should have a designation on anything that was sent to an IRA showing amount and year. Start a file with the key documents... you are not likely to remember the details a decade from now. Some accountants will include IRA data with your tax file. My accountant thinks it is important to lay the foundation each year so that down the road he will have the information available. I am curious why you did so many transfers. Can you provide some background?

With the revised tax rules governing the sale of a primary residence (no tax on up to 500,000 in gain if you live there 2 out of the last five years), I am not sure what the fascination with trying to do real estate in an IRA. If you are talking a regular IRA owning a primary home, I don't see the advantage. You may be comparing no tax on the sale of a primary residence to gain within an IRA taxed as ordinary income in the future. When you own a home, most folks get a deduction for property taxes and interest each year. When the cash down is 5-30% of the home price so the investment is leveraged. Those are advantages over and above the new possible exemption for taxes upon sale. Virtually all IRA ownership of non-traditional investments means higher costs, more complications (like year end appraisals) and more paperwork. Sure there are ways to make money in real estate. But, not everyone "knows what to buy", has the time, patience, negotiating skills, repair skills and ability to work with renters/leasees. The comparison to a $100 dollar return on a mutual fund looks very odd. Where are the assets that are going to allow you to buy real estate if the account is only earning $100? My experience tells me that very little involving investing or real estate is obvious, and that there is no single approach that works for everyone all the time.

Appleby answered your question, I was commenting on possible alternatives. Responding to your bullets: (1) Yes. (2) Yes, because it was a contribution. (3) No. You CAN withdraw the other funds, but because of your age (30), you would have taxes and a penalty. You have additional options if you plan to use the funds for a first home or because you are disabled. These are two of the reasons where the "why" is important. I also asked "why" because you often have alternatives to dipping into a tax shelter like the Roth. Not everyone that posts here is aware of some of these options... like a bridge loan when you are stuck between two homes. When I respond to a question, I try to answer both the specific circumstances (which is challenging when some details are left out) and provide a generic response that will be benefitial to a larger audiance.

Correct me if I am wrong, but I think the theory behind limiting all of these type of investments is that they are subject to abuse and "shenanigans" (my mother's technical term). If the Roth account holder has any control over the assets, then it may be possible to do an end run around the maximum allowed contributions. For example, if you could buy a house with a Roth.... you could then use taxable funds to add a deck, finish the basement, update the kitchen in one year. The house might theoretically rise 100k in value and presto chango, you have goosed up your Roth by 100k, bypassing the 3K max. You don't need to be a rocket scientist to figure out ways to convert taxable to tax free dollars that Congress never invisioned. Allowing these kinds of transactions could damage the long term survival of the basic Roth used by most people. The bad behavior at Enron severely damaged the viability of dozens of other energy firms. The basic program works just fine for most people, especially if they start early. Note that one of the few adjustments made by Congress was to allow older couples to increase their contributions as part of a catch-up provision.

Two points: First, why empty the Roth? Right now money is on sale. Interest rates are extremely low. You don't say the current value or what you plan to do with the funds. Have you considered alternatives? You can refinance your house, get a home equity loan, low cost margin equities at a brokerage, look for a zero interest credit card or intra-family borrowing at a rate that exceeds what most people get on CDs. Even if your Roth has a lower value now, you might want to keep the tax shelter going. Second, you need to reconsider the type of investing that your are doing with your Roth. To be down 20% after 5 years suggests that you made some volatile investments or perhaps got caught with the tech decline (many tech funds are actually positive over the alst 5 years). You normally do not need to hit home runs or wager on long shots to do well and reach your retirement goals. A well diversified portfolio rarely has any 5 year period when it is down, and historically there are no periods beyond 10 years that are down like this.

Why? Right now money is on sale. Interest rates are extremely low. You don't say the current value or what you plan to do with the funds. Have you considered alternatives? You can refinance your house, get a home equity loan, look for a zero interest credit card (a very short term option) or intra-family borrowing at a rate that exceeds what most people get on CDs. The Roth is a great tax shelter. Before I empty one, I would exhaust all the other options.

Richard - thanks for the alternative viewpoint. I am not arguing that an investor has all the natural or god given gifts to make decisions. No one I know was born that way. Of course there are lots of resources at the investor's disposal: the WSJ, financial mags, Value Line, Morningstar, Uncle Lou, websites, and financial advisors to name just a few. What I am arguing against is the tendency for some folks to abdicate the decision making to others and rely completely on their expertise. The financial interests of a saleperson, banker, broker or financial advisor are often driven by commissions, portfolio turnover, performance quotas and sometimes contrary positions on a specific investment. I believe the tax payer has the ultimate responsibility for making investment decisions. In legal terms.... they have standing. It is their money and their future. I will give you an example of how things go wrong when a person lets someone else make these decisions. I was asked to review the decisions of a major brokerage with regards to the account of a 85 year old widow. The customer had a rudimentary knowledge of investing, and knew the difference between stocks and bonds. When she opened this account she had told the brokerage firm that she needed this pool of assets to supplement her retirement income and did not want to take high risks. Other than owning a home with 2 apartments, this brokerage account was the only other asset. The brokerage had the women give them decision making power over investments. The firm passed this account to someone with less than five years experience. The account rep put this person into many different investments including international tech funds, narrowly cast sector funds, and a fund that said they were momentum players. There was not a single broad based equity fund and not a single investment designed to produce income. All of these investments had high commissions. The account value dropped substantially, and the customer called the rep multiple times to urge a more conservative approach. After five years she had less than 35% of her original assets and pulled all funds from this broker. My findings were that the firm assigned this account to a person who did not have sufficient training or experience, that the firm did not supervise this young staffer, that the account rep made decisions completely contrary to the investment style requested, that the account rep chose high commission investments when less expensive investments were available, that the account rep failed to respond to questions and redirection guidance. I also found that absolutely none of the investments chosen were suitable for an 85 year old widow needing income supplement. The arbitration settlement restored less than 1/3 of the damage done by the broker. Sure, there are investment advisors that do a good job. My experience suggests that they are modest in number and hard to find. A quick survey of the problems presented at this website shows that a large number come from consumers who do not spend enough time to understand the tax code, understand their investments, read the account agreements, confirm that actions get posted, etc. The "Pogo" factor applies. Richarl, it sounds like you believe in delegation. I take the position that greater involvement by the consumer is wise. Those positions are not complete mutually exclusive.

If the funds you received in 2004 look like a final paycheck with the usual witholding, then the answer is yes. I think you are saying that since you worked in 2004 that you received a final paycheck that included accumulated leave. I believe you would have no problem claiming these dollars as ongoing earned income. I can't answer about lump settlements. I know that some government employees get paychecks in early January that encompass both hours in the new year and hours in the last few days of December. That throws some compensation into the following year.

Good catch on the 1.5% fee vs the fund fees. If additive, this package is not going to perform very well since almost 3% will be coming off the top each year. {the same is true of many funds of funds... which gives you two layers of fees in most cases} I know and work with about 30 very wealthy people (3M to 25M in assets) and to the best of my knowledge only one uses an investment advisor... so I have a trouble believing the comments about wealth customers tending to use advisors. There is a big difference between a high end advisor and the average retail guy you might find in most cities. My impression is that maybe 2 in 10 retail level advisors is worthwhile. I have sat in on some meetings with them and reviewed "reports" they provide customers - it is mostly canned stuff from the main office, designed for marketing. You can have some fun asking questions like which class mutual funds shares are listed and get a lot of squirming. I have very limited experience with the high end advisors, I sure hope they are better. A friend of mine is the single best stock picker I know and has for a few years been the chief equity analyst/selector for a hedge fund in Manhatten. Last time I visited him, he pulled no punches. He remarked that he was surrounded in his mid-town offices by dozens and dozens of "advisors" and asset managers who "would not survive if they had to rely on their own investment skills". I was a little surprised by this and he commented that most of these "experts" make their money by babysitting assets and taking a small percent of the total each year, not actually making great investments. That is his view not mine, but I found the observation to be interesting. My life experiences have taught me a tough lesson. The single best person to research, track and decide about investments is you. I legal terms you have the ultimate "standing", 'cause it is your money. It is hard to imagine anyone has a greater interest in your financial future than you do. For one thing, you don't have any conflicts of interest with YOU.

OK, I will take the plunge. First, the comments on Vanguard are inaccurate self serving comments from a salesperson. The Vanguard index funds (because of the nature of index funds) have minimal staff, no site visits and low portfolio turnover. Some of their funds have annual expenses below 0.20% and it makes other industry people very annoyed because anything that involves research or advice can not get that low. Second, don't be seduced by the package. You need to spend some time figuring out exactly the expense ratios and transaction fees you may have. Some funds have many classes of shareholders with different expenses. It is not easy to determine this... it is buried in the fine print. Third, these funds cover many different investment styles. Think of a matrix of company size (large, med and small cap) on the one hand and investment expectation (value "I think this is underpriced" vs growth "I think this firm is successful and getting much bigger"). Be wary of chasing the hot performance of 2003. For example, many small and mid caps had a torrid year. Good years are often followed by weak years, so chasing performance can give you below average results. No one can accurately predict which sector or industry will do best this year. {I have been waiting for a turn around in Japan for a decade.} Fourth, they all appear to be no load, but you may have the "broker" versions with different expense percents... you need to ask. Performance on most were good but some have only been in existance for a few years. Fifth, there are over 8,000 mutual funds. There are lots of choices that are "open". Financial firms close funds for various reasons. Sometimes to sell other products. Sometimes because a successful fund has problems maintaining its success as it grows bigger. "Closed" should not be confused with worthwhile. Some key points on individual funds American Funds Amcap AMPFX Large cap growth, started less than 3 years ago. Did not beat S&P500 for the time periods I was looking at. Index fund might be better since 0.82% is easily 1/2 percent too high. Bridgeway Ultra-Small Company BRSIX (closed to newbies) Small cap blend stategy, duplicates TSPFX Clipper CFIMX Concentrated large cap. May duplicate Marsico fund. 10 largest holdings comprise 50% of fund. ALSO 26% cash - so you are not fully invested. Mostly is riding financial and consumer stocks right now... concentrated in two sectors. Hotchkis and Wiley Large Cap V HWLIX Achieve a very good 11.8% annual over 10 years, with 1.08% expense rate which is decent. This is one of the oldest in the group, since '87. Matthews G & I (closed to Newbies) no info readily available Nations Marsico 21st Century NMYAX Little to say here as this one is relatively new. Street.com said this: Nations Funds is launching the Nations Marsico International Opportunities fund, essentially a broker-sold clone of the freshly minted and no-load Marsico International Opportunities fund..... Like its no-load counterpart, the fund will be a high-octane growth portfolio run by Jim Gendelman. He follows a concentrated approach, similar to that of firm founder Tom Marsico.... (formerly of Janus funds) Concentrated investing -- the practice of holding a small number of stocks -- can yield big returns, but can also sink a fund in a hurry when those stocks head south. RS MIdCap Opp RSMOX I do not like this one at all. 400% turnover, 1.53% expense ratio, performance can be summed up as one great year in 2003 (54%) but the other years are subpar. Mid cap growth. Skip this one in my opinion. RS Parters RSPFX Since '95. Performed well, but the 1.88% expense ratio is high. Small cap blend overlaps with BRSIX. Not excited about this one. TCW Galileo Value Opp TGVOX Good performance, but some stats indicate this is a higher risk fund. Since 97, mid cap blend strategy. A small amount here would mitigate the more risky portfolio appoach. Before you decide, read over the comparable stats for the funds. Wachovia should make this readily available. Ask about the exact expense data for you and any transaction costs or fees. You might do just fine by picking 5 non-overlaping styles and dividing the 25k up equally. I would not be surpised if just one low expense general index fund might do just as well. Info on these funds can be found at brokerage sites and fund websites. I had fun looking up some new fund names and spent about 2 hours reading the performance and portfolio data. It is educational if a little boring to some. I doubt your "advisor" knows as much about these funds.... but that is a different story. You might want to ask him/her if "they are all fully invested". Some are not. Is there a fee for the "advice" you are getting? 25K is a very small account, even if it seems like a lot to you. Do not expect to get a lot of time after you commit to the plan.

If you can provide an internet link, I will look over the package. It might take a few days to get back to you.

One option you could consider is buying a broadly based index fund with ultra low annual expenses. Most brokerages offer something that has expenses below 0.4%... with Vanguard leading the way with sub 0.2% annual fees. Unfortunately, Vanguard prefers direct sales, so you won't see them on many brokerage mutual fund lists.

You do not provide enough information to respond, and I did not find this in a quick look at Wachovia. When choosing mutual funds, here are some questions to ask: 1.) what is the focus 2.) who manages the fund and for how long 3.) front end or back end loads (commissions) 4.) annual expenses 5.) turnover rate of portfolio 6.) annual custodial fees (if any) Motley Fool has just run some articles on the hidden expenses of mutual funds. They made an interesting case that stock commissions are not disclosed as annual expenses. I have no problem with the minimum investment of 25k. I am surprised that more mutual funds have adopted a high minimum to avoid the expense of very small accounts. I am wondering if this is one of the new "in vogue" fund of funds... a mutual fund comprised of many other mutual funds which means you have layers upon layers of annual expenses. Fund of funds are ussually a horrible investment.