John G

You don't indicate the total amounts, types of investments, annual fees and the recent earnings. Without these, offering a response is a lot of guesswork. Here are some ideas: 1. Ask you custodian to waive the fees. Some will do so to retain a customer. 2. Consider consolidating the accounts to reduce the fees at the existing custodian. This might work if your Roth is scattered among multiple mutual funds, each with an annual fee. 3. Consider transfering the assets to a custodian that either does not charge fees or charges less. Ask custodians with whom you already have a business relationship, and ask them to waive the fees. 4. Shift other assets to the custodian if they give you a break when the total assets exceed 10, 20 or 50k. 5. Have patience. You had a couple of years of chop. I would expect that the next few years will be more normal. No guarentees, but the smart money started flowing back into Wall Street four months ago. Performance normally should be able to cover fees. The March issue of Consumer Reports does a great job of providing a concise review of retirement planning. It may give you some other ideas on your 4 year old IRAs. The IRA is a wonderful tax shelter. Don't scoot out after a couple of bad years - they do happen and are unpredictable. I assume from your kids to college comment that you should be in the cycle of building assets and the IRAs are a good choice for investing. Perhaps you can shift a bonus or sell some stocks for losses to get back under the income threshold. There may be some loosening of the income noose on Roths so that is another reason to hang in there. Hey, the bright side is that if you can no longer meet the income qualifications... you have gotten up into the top 5% of the US. While you can take contributions out of the Roth without penalty, where are you going to put them? Does it not make more sense to reduce the fees if possible and just ride it out for a while?

You will receive annual reports, dividends, stock splits, and any information the company elects to distribute to shareholders. You will also receive all similar material from mutual fund companies. Your voting priviledges are the same regardless of the type of account.

There was a period of time when keeping IRAs separate was an issue, but that has all passed now. Speak to your custodian - you should not have any problems contributing to the consolidated Roth account.

I may not completely understand the facts that you presented. I am assuming that the larger amount was a Roth conversion, as you referred to paying taxes over 4 years. You don't pay taxes on regular Roth contributions, and the 4 year period only applied to conversions in the first year. Sure, you can change custodians. You need to use the term "rollover". Roth to Roth. Regular to Regular. Shifting funds from a regular IRA to a Roth is "converting". You can not move money the other way, except to reverse a conversion, and there is a limited amount of time when you can do that. The simplist way to change custodians is to first search for a custodian with the investments you like and with reasonable fees. Then, fill out the forms they will provide for a rollover. Note, closing some existing accounts may trigger fees. The nastiest of these are any back end mutual loads. You need to ask about fees before you act. Within a custodian, you are normally given a lot of latitude to choose investments. Some custodians have literally thousands (too many!) choices. Others have a more restricted list. Call your custodian and see if there are any other investment options available. You may be able to get what you want without moving your money. Ask. I-bonds ? When you opt for "guarentees" and "security", you get very low returns. I would not recommend these types of investments for anyone but the most timid of people or those who expect to draw on the assets in a few years. IRA accounts are generally expected to be long term investments often with a couple of decades of wealth building. Choosing bonds seems awfully conservative. The stock market has had a rough few years. It is inconcievable that this trend would continue much longer. Neither I nor anyone else can tell you when we will start to get good returns again, but if I had a lot of cash I would be shifting it more into a broad array of stocks right now. Post again if you want to clarify your situation (type of current investments, age, etc.) or have additional Qs.

Perhaps the best idea is to put it all in your wife's account. It is a positive thing to do, supporting the spouse. Two accounts are more to track and can hit you with two annual fees. These are relatively minor reasons for making a choice. Perhaps you can find a little more money from other sources and still do both.

Welcome to the world of Roth. On your question.... you do not get a choice. The "I" in IRA stands for individual. Each account has on it the name of the taxpayer who is eligible. A "custodian" keeps the records and is the conduit through which the taxpayer makes investment decisions. Both you and your wife may be eligible for an IRA. However, you can't have a joint one. You can have two separate IRAs, one for each if you both meet the various income and tax filing status regulations. Custodians normally ask you to name a beneficiary when you open and IRA. For example, you might make your wife the primary beneficiary and your children secondary beneficiaries. The designation of beneficiaries is not related to how the account is registered.... individually. Post again if you have more questions. You may want to get a copy of IRS publication 590 which covers IRAs and Roth IRAs.

I have $2K in a traditional IRA and want to roll in a Roth - once I roll it over, does that $2K count toward the maximum annual amount that I can put in? No. The rollover has no realtionship to annual contributions. However, the annual contributions for Roth and regular IRAs is based upon the combination of all contributions to all IRAs regardless of custodian and type of IRA. Note, if you make contributions to a regular IRA and then roll it over in the same year, those earlier contributions count against your limit. Of course, it does not make much sense to open a regular IRA and roll it to a Roth in the same year when you could just open the Roth directly.... but that is another story. If I roll the traditional into a roth, will I be taxed on the $2K? Yes. Rollovers are taxed as ordinary income. There are tax filing status and income restrictions to qualify for a rollover in any year. The accountants will probably answer your other questions. I would recommend that you not start an IRA/Roth program and immediately think about taking money out. The whole purpose of this primo tax shelter is defeated if you don't use "time" as your friend and invest for the long term.

If any general readers managed to read through all these response and got to this message, let me suggest that there are two lessons for the average citizen: 1. You run a higher risk of inproper execution of a IRA custodian transaction when you wait to the deadline (such as April 15 or Dec 31) in part because of the rush, congestion and less informed staff processing materials. 2. You must confirm requested transactions are completed by checking your statements. {when you wait to the deadline - you will not see a statement until the deadline has past} Although this post is about custodian mistakes, I will suggest that another comon lesson from I have extracted from the large number of problem questions that are posted here is: Get professional advice from a tax preparer or accountant to confirm your interpretation of the rules and how they apply to your circumstances. Spend the money up front as mistakes are annoying, time wasting and potentially very expensive. Pass all the problems we have seen in the past few years through these three guidelines and I think more than half of all the issues disappear.

Ah, the secret to teasing a response from our tax accountants is writing in blue! Thanks to all for addressing some of the problem areas. Anyone want to add a message on real estate and collectables? Luft and Sheiner have written a good book on options for those that wish to learn more about the various types, risks and benefits - "Listed Stock Options". I think the revised version also discusses index options.

I have looked in a lot of dark corners of the IRS websites and have not a definitive list of disallowed investments. I have one return phone call but it has been days, and frankly this is not a topic on which most IRS people are trained. Let me rephrase my prior assertion. I do not believe that any normal investor will find a custodian that will allow naked puts/calls (which is the specific form of options that can expose you to a risk beyond your IRA assets). If anyone knows a custodian that specifically allows naked put/call trading, post a name and phone number. Some, but not all custodians will allow narrowly defined options like selling covered calls in an IRA. BG may not understand that there are a wide array of buying/selling combinations with options including straddles, strangles, and hedged options. This type of investing requires a vastly greater level of investment knowledge and a lot more time for decision making and tracking. Our accounting and tax specialists on this message board should have posted on this topic. Perhaps by refreshing the question we can construct a list to cover other issues like collectables, real estate, currency trading, hedge funds, closely held corporate stock, margin accounts, etc.

What chunk of change is involved? If this is a modest amount, the effort may not be worth any special actions. I the person was not currently making contributions, they could flow small amounts back in as "contributions". We don't know the magnitude of the issue here. Generally, I agree that it makes sense to get the funds redeposited to a IRA, but why assume that you would keep the funds with the same custodian. I sure would not. What kind of tax pro would refer you to a custodian for an answer? That is ducking the question. How about a tax attorney then? If it is determined that the funds can not be redeposited in an IRA, I would consider additional legal action over the damages. However, if the settlement already includes extra dollars rather than just a simple 1:1 restoration, then the arguement for a return to the IRA is weakened. Perhaps the original person can clarify: big money or small, just a restoration or was there any additional kicker.

The comment immediately above is not accurate. The IRA investments are restricted by IRS rules and custodian rules. For example, I can't think of one custodian that will allow you to sell or buy and option that exposes the IRA to unlimited risk. The reason is that you can't just throw more money into the account if you "idea" is a bomb. I seem to recall there are restrictions relative to real estate and collectables, but I defer to the tax pros on those points. There are many types of investments that you can make outside an IRA that you can not make inside an IRA. One of the accountants should have stepped up to list some of investments that are not allowed. Common guys - lets post a list or a article reference. There are also many common sense limitations that you should impose on yourself based upon your level of investment knowledge and experience. For example, we have had dozens of people post there personal horror story of investing in one company, or in high tech or on a long shot prospect and have been badly burned. I seem to recall a few lost 75% of their value and few implied total loss. These were absolutely allowed investments, but just plain dumb choices. In my experience, I have seen a tendancy for some folks to think they are the exception to general rules of diversification and risk management.

I concur, not so fast with that withdrawal. It is not all that easy getting money in a Roth. The 10% penalty exceeds what most loans will cost in a year. Many loans allow you to deduct the interest. At a minimum, you could consider getting some kind of bridge loan or use your margin borrowing power for one year which would avoid the penalty... actually about just over 8 months left to avoid the penalty if I have your facts correct. You might be able to do a short term note with a family member who is currently complaining about CDs paying 2%. Honest - money is on sale right now. When the cost to borrow is so cheap, why raid a great tax shelter? Think twice before raiding the Roth. Think three times! Try looking at your circumstances with more creativity. Do not single source on your investment knowledge. Especially relying on a media figure like Suzie O... some of her advice leaves out a lot of the details that are very important. You will probably get better advice at this web site from the composite of accountants, tax pros and investors.

You have two levels of investment restrictions: IRS and custodian. I have never seen a write-up on the IRS limitations, perhaps our accountants can post a reply now that we have past April 15 peak work. Custodian limitations vary widely and are often more restrictive than IRS rules. One issue with regard to options is that some types carry fixed (pre-determined) exposure while others can be unlimited exposure. Since you just can't add more money to a IRA or Roth account, custodians are unlikely to ever allow open ended option risks, even if IRS regs were silent. Many, but not all, custodians will allowed covered calls in a IRA. Naked put/calls are a totally different matter.

You can only make cash contributions to an IRA or ROTH IRA. You can only insert stock into an account if the stock is already in a retirement account and you are doing a rollover.

Some ideas: First, if the IRAs are under the same name but at different locations you can choose to combine the accounts. Second, if you have other assets at the firm you can "ask" them to waive the fees... while waiving fees is becoming less common with firms that have seen their earnings erode, it surely doesn't hurt to ask. New fees are popping up with custodians that never charged any, but there are still many custodians that either charge no fee or a very small fee to win your business. If all of the accounts are with the same custodian, call them up and complain about fees. The noise makers sometimes get better treatment. Do some comparative shopping. Closing an IRA is a messy proposition. It can be done, but most people have too complicated a circumstance for it to make sense. Do a search on "tax losses IRA" on this message board as the topic has come up dozens of times. While you might be able to close your accounts, perhaps a better stategy is to just absorb some down market lumps and write it off to your investment education. Think long term and don't get aggitated by short term movements in the market. Finally, I am not sure that it makes much sense to own individual stocks when your total investable assets are less than 6,000. You are not going to be very diversified and the transaction costs are pretty high. Owning mutual funds would not innoculate you from a down market, but the diversification and transactions costs are more appropriate for initial investments.

Your dad has a gotten you started in the world of investing. The above comments are on target. I will add only that from this day on you need to spend to learn about investing. Sounds like your dad made the first choice which is just fine. But, over time you need to learn how to manage your own funds. A good start is to spend 1 hour each month reading one general investing magazine like Kiplinger, Money or Worth. Your dad would probably appreciate time spent with you to talk about the investment choice he made. Your local library has some good general guides to investing... maybe you should check one out, read it and leave it on the coffee table for dad to see on Father's Day.

First, you need to consult with an accountant or tax preparer to confirm that your conclusion is correct. The professional should be able to do some calculations to work out the excess you must withdraw and the various penalties you owe. Also, some custodians can help you unravel this problem and have the computer systems to track all the contributions and results. Because of the co-mingled assets from different years, you have a messy problem and you need to use local resources to solve it. You probably will need to file an extension for your 2002 taxes as getting this resolved in the remaining few days will be hard. Once past April, you will find less stressed out staff with which to communicate. Good luck.

NO LOAD - refers to a group of mutual funds that are defined as not having any front end or back end commissions charged. The other two catagories are "LOW LOAD" (funds with a smaller percent fee such as 3%) and "LOADED" (funds that take between 6 and 8% out either initially or when you remove funds. You need to understand that "LOADS" are one of three major catagories of expenses that can be charged with mutual funds. The other two are "annual expenses" (often refered as 12b expenses) and "annual fees" (what the custodian may charge each year to maintain the account, varies from zero to perhaps $80). Annual fees vary from as low as 0.17% per year for some INDEX funds to about 3.00% for some special purpose funds that have a narrow focus like a specific economic sector or international location. Since there are over 10,000 funds... all these comments are generalizations and there are exceptions to each of my statements. All mutual funds incur various expenses to operate such as printing, accounting, postage, advertising, etc. "LOADED" funds usually are designed to be sold by commissioned agents who get a substantial part of the front end commission. "NO LOAD" funds are usually sold via the internet, mail or 800 numbers, something akin to GEICO insurance. I know of no funds that charge anywhere near 5% each year. It is even rare to get up near 3% as that is such a huge hurtle to overcome. Having a "well known name" is no indication that any fund is a good choice. There are lots of well known funds that have been long term stinkers. I recommend that you reach the March issue of Consumer Reports to find a good list of funds that have performed well in many economic environments. It has been my experience that mutual fund sales agents rarely have an indepth understanding of the products they sell. There is a lot of turnover in this industry and you can't make a living if you can't generate commissions. Be cautious about your source of information. You have the primary role in determining if your investments are appropriate. A good place to start is to read Kiplinger Finance, Worth, Money or CR and build up your basic understanding of mutual funds. Next stop is the local library to get a general book on investing. One you have a couple of potential funds to consider (such as using the CR listings), the next step is to request a prospectus and READ about the investment objectives, fees, expenses, and fund mgmt. A word of caution: often the hotest funds in one year become the dogs in the following year. This is especially true of narrowly based funds such as those that might focus on one country, one industry or one type of company. Chasing the top performing fund of the last couple of years is ussually a very bad strategy. Finally, you should also understand about INDEX funds. These take a mathematical approach to investing, working off a list defined by someone.... such as 500 largest companies, all companies on the NYSE, the 5000 most actively traded firms, etc. The huge advantage of index funds is that they have extremely low annual expenses, because they are computer driven and have a minimal staff (no junkets to visit firms for example). Low expenses means that you get almost all of the benefit of the annual performance. INDEX funds work on the premise that finding an inexpensive way to own a diverse portfolio is more important than stock picking. If your broker friend does not want to talk with you about various types of mutual funds and in particular INDEX funds, then you should be very suspicious about the quality of the advice. You find out about commissions and fees by asking for a prospectus. Of course, your broker should answer this direct question in non-ambigous language. If you sense you are getting the run around or that your question is derided or the answer is obscure - - stop doing business with this person. Ethical brokers will clearly explain the fees involved and will try to make a case that their advice is worth those fees. Sometimes it is. I believe that most individuals will benefit from building up their knowledge and making less expensive investment choices. It takes some time, you will make some mistakes, but, you will have a better understanding of your investments. You asked some very good and big questions. Post again if you have more Qs or I did not cover everything you need.

The answer depends upon what type of income your child has. You need to make the decision based upon "earned income", which means anything with a W2/paycheck but also includes newspaper routes, babysitting, etc. Interest and dividends do not count as earned income. You may need to check with a couple of institutions to find one that will accept a minor Roth account. Last time I checked, Etrade said no, Schwab said yes. It is not an IRS issue but what kind of business the custodian is trying to attract.

Some of the major choices for a Roth custodian include: mutual fund, brokerage, bank, and credit union. Each option has positives and negatives. Banks and credit unions usually have the narrowest choices for investment options. When you are just getting started, getting off square one is more important the focusing on your investment choices. But, eventually your Roth assets grow and you want to invest wisely for the long haul. As you are in your 20s, the long haul is measured in many many decades. Stocks (aka equities) tend to outperform many more conservative types of investments over long periods. In any given year, stocks can be up or down. As the hold period gets longer, stocks on average perform well. For example, a lot of folks use 10% as the long run average for a very mixed collection of stocks. If you were to focus slightly away from utilities and blue chips and more towards growing companies the long run annual percent is often considered notch higher. Bond performance also flucuates, but over the long haul does not usually match stocks for performance. What options did your credit union offer? I would imagine that CDs were most likely. Very low risk, but a corresponding low annual return. You should consider subscribing to Kiplinger Financial or Money magazines and start building up your understanding of investment basics. Your local library also has lots of books on the subject. You need to decide what types of investments suit your tolerance for risk and your long term objectives. Post again if you have questions.

You may want to consider mutual funds for your first investment, either directly or under a brokerage. Look for a list of NO LOAD funds (no sales commissions on these) in the March issue of Consumer Reports. You probably want a broadly based fund, and the Vanguard 500 is a good low expense version of a broad based fund. CR has a general overview on retirement investing right around tax time. I have not seen this issue, but they usually choose March. Right now everyone is doing a Sadam with their investments... going deep into a bunker because of three bad years in the stock market. I would caution against an overly conservative approach. Do not rely on the advice of just one person or one published source. You need to read/talk with a range of people.

Pros: do it while the law still allows, eliminates mandatory distribution, can be pass to heirs as a Roth, may have an option to convert during a year when your marginal bracket is low, future taxes may be higher, can be a great idea if you are taking off some months in the year you convert or are laid off and your taxable income drops. Cons: better have the outside cash to pay to taxes, may jump your tax bracket, taxes now vs later are often a wash, you absolutely need to consult with a local tax prep or tax advisor to make sure you got it right, future tax brackets may be lower such as when you retire in a lower income tax state but converted in a high income tax state. Alternatives: partial conversion Your style of investing and general track record also can make a difference, but if that applies you probably already know what I am talking about. I have some friends that have built a small Roth empire by using some high return IPO investments... not typical, but could be a factor for a very small number of people.

It is too late for 2002.

If you qualify for a Roth or IRA of $3,000... then you can open 1 or more IRAs and vary your deposits among them. For example, you could split it into $1500 and $1500 or have six IRAs each with $500. The IRS does not care how many IRAs you have, just that you qualify and do not exceed your allowed contribution in each year. You may incur additional annual fees having multiple accounts and certainly the paperwork burden goes up. If you are in a broadly based mutual fund then you may not need to diversify further until your assets grow significantly.