John G

Totally agree with your comment about disclosure of what you don't know and the pro should have asked clarifying questions before giving advice. Contractors, consultants or business persons that honestly admits the limits of their knowledge gets plaudits from me. When I chose my accountant, he was very clear about the limitations of what he knew about IRAs and then Roths. We both have learned a lot in a decade.

When asking a complicated IRA question of any custodian, skip the sales clerks and order takers and ask to be connected to the backroom IRA department. They are much more likely to be trained on the details of IRA issues. But don't even trust the answer you get from them. Check with your accountant or tax preparer as well. It is easier to correct a problem before it is created and there are lots of peculiar date and procedure issues with IRAs. Less heartburn, less time wasted. QDRO, the person posting the question may just not understood the answer they got. Customers often don't understand that transfer, distribution and cash out mean different things. If the tax payer fails to ask a clear question or leaves out important information, the custodian can easily make a mistake in the information they provide. You sure see those problems on this message board too. I believe that the error rate among custodians is pretty even. There is a much greater risk of asking the wrong person within the firm.

IRS has no minimum age limits for children. However, the child must have "earned income". With teenagers this can mean babysitting, paper route, fast food job, etc. If you own a business, you can employ your children to make copies, file, clean up (good luck on that one), etc. Very young children are less likely to qualify unless they are child models or something that you could document. The actual money earned does not have to used to fund the IRA. So a grandparent could match or 100% gift the funds for an IRA as long as the grandchild otherwise qualified. It is a little tricky to find a custodian that will accept a child IRA. Schwab does, no problem. Etrade does not, no acceptions. This is an internal issue for the custodian not an IRS constraint. You may have to make a few phone calls, but you will find custodians that have no problem with children having IRAs.

I assume you are talking about either an IRA or Roth IRA account, but you did not say specifically. If it is one of the IRA accounts, you would not be "transfering" your shares, you would be taking a distribution. If you are not older than 59 1/2, you would incur a 10% penalty and would owe taxes if the amount transfer was greater than your basis. Yes, there is a way to write off tax losses in IRAs but the method is complicated, it requires you to close most or all your IRAs, you can't cherry pick specific investments that loss money, the write off has a percent of income limitation, etc. Probably 95% of the folks who think about this will not be able to make it work. See the various comments and articles at this message board link: http://www.benefitslink.com/mbmirror/12458.html

This topic has come up other times with various ages, marital status and income levels. Here is another response: http://benefitslink.com/boards/index.php?showtopic=16539 You can use one of the options at the bottom of the main page to search for specific topics and to pull up older posts by changing "last days". If you have specific questions, post again. Be sure to give some of background info on education, marital status, job/income, investment experience, goals, etc.

I have updated an older posting on this topic: Congratulations for thinking ahead! Starting early will very likely put you on the path to a very comfortable future. If you and your spouse (eventual spouse?) each set aside $3000 per year and invest wisely you have excellant prospects for becoming millionaires and then some! Roth 101: Current maximum is $3000 each for husband and wife as long as the total earned income for either exceeds that amount. It is $500 higher for older workers - the "catch-up provision" which does not apply to you. You must have "earned income" (like a paycheck) and meet a few other qualifications. Most folks in their 20s would have not problem with the basic qualifications, but check IRS publication 590 for the filing status and income limitations. IRAs (all kinds) are INDIVIDUAL accounts. If you marry, your spouse will have seperate accounts. Roth IRAs do not provide a initial tax deduction. Regular IRA maybe deductable, depending upon your income. Roth IRA has no set payout schedule, regular IRA does and it can be messy. Both types of IRAs build assets in a tax sheltered environment. Roth assets are not taxed at dispursement. Regular IRA withdrawals are taxed as ordinary income. There are also some inheritance issues that may favor the Roth.... but that is way off in the future. Given the potential long holding period, I would assume that the Roth will be more advantageous. Note, no one can tell you for sure which type of IRA is best because there are just too many parameters and the regulations can change. I can tell you that in most scenarios that I run the Roth comes out ahead because the initial tax deduction of a standard IRA is overwhelmed by the tax free Roth distributions and other features. Choice of a custodian: All Roth and regular IRA accounts are held by a custodian. The main choices are banks, mutual funds or fund families and brokerages. You are looking at 30+ years of investing... and perhaps a lot longer since you never take out all the funds in your first retirement year. I would recommend that you consider a broad based stock mutual fund. There are more than 8000 mutual funds, you should look for a NO LOAD (no initial percent commission) fund. You can contact a mutual fund company directly (see the March or April issue of Consumer Reports for a screened list with phone numbers) or deposit your funds at Etrade, Schwab or other brokerage that offers hundreds of mutual fund choices. Contact atleast three potential custodians. Ask them for their "newbie" brochures on investing, IRAs, Roths. Ask them about minimum initial deposits, fees, and various mutual funds. Collect info from three potential custodians and then make your choice. Why stock? Because over the long haul, stocks traditionally out perform savings accounts, money market accounts, CDs and bonds. The performance of different catagories of investment will bary in any given year, but if you look at any holding period greater than 20 years common stocks are the clear winners. Time is an investors friend. If you go back and look at the performance of long running mutual funds you often will find that up years outnumber down years anywhere from 6:1 to 10:1 and that the best up years typically are more up than the worse busts. Why mutual fund? You can buy by specified $ amounts. Very diversified. More efficient than purchasing odd lots of stocks. Easier to track. Easy to buy or sell (liquid). Etc. I would keep things reasonable simple the first few years. Educate yourself about investing. After 5-10 years of building you "nest egg" you may want to re-evaluate your initial investment choice, but initially, just one good broad based mutual fund or index fund will work. Since you are in the learning mode, I would suggest that you read up on mutual funds in that Consumer Reports issue that focuses on retirement planning, or in Kiplinger Finance, Money or Worth magazines. My personal view is that increasing your knowledge is more important than worrying about returns in the first few years. Some custodians charge annual fees for maintaining IRA accounts. But many custodians either do not charge fees or will waive the fee upon request. If you set up a monthy deposit plan that connects to your checking account you often will get the fees waived. Fees also are often waived after your assets grow, or if you have other assets/accounts with the custodian. You did not say anything about retirement/investment options related to you employment. Many of these options include a company match. If your funds for investing are limited, a employee matching account might be superior to the Roth. Generally, you want to look at this decision each year. Good luck investing.

Click on this thread to see a prior answer: http://benefitslink.com/boards/index.php?showtopic=16539 This topic is covered a lot on this message board. You may want to scan other Q and A. To give more guidance, you need to indicate what you need to understand and provide some background on age, marital status, investment knowledge, approximate income and long term goals....

Thanks Pax. Here is the other referenced thread - note that the max amounts are dated compared to the current 3k or 3.5k Roth limits. http://www.benefitslink.com/mbmirror/6565.html

The most scary thing you said is that you have no savings. How about credit card debt? First thing you need to do is reconcile your income with your expenses. Someone who is 27, single and with 35k in income should be socking away a good percent of their salary. I would think you should be able to set aside perhaps 5K towards savings and investments. If not, then trim back your spending. Buying a home ussually requires a down payment and other expenditures for drapes, paint, furniture. You might be able to participate in a "first time buyer" program some cities support.... but given your current financial status that is a number of years off. The 401k plan is a good thing, especially if there is any matching component. Starting a Roth would be fine if you had some core assets for reserves. What would you do if your company cut your position or some emergency expense came up? Perhaps a reasonable plan for you to make is to commit to one dollar into "reserves" and one dollar into a Roth. You can NOT grow funds aggressively and avoid a risk of loss. Don't look for a 5 year solution because there are none out there. Perhaps you should subscribe to Kiplinger Financial mag to build up your experience on investment choices, budgeting, etc.

Yes, there is a difference in "custodians" that you might choose. First, they may differ in what types of investments they offer. For example, banks may focus on certificates of deposit... although they may also have a few mutual funds. Almost all brokerages offer both traditional individual purchase of stocks (I do not recommend this for folks getting started) and mutual funds. The third major option a mutual fund or fund family, and most funds come with multiple options ("family of funds"). Mutual funds come in two major types: LOADED and NOLOAD. Load refers to a front end or termination commission. The loaded fund typically has the extra fee to reward the salesperson who steered you to the fund. Another difference in "custodians" is in the annual fees they charge. Zero is a fine number that some custodians still use, especially if you have other business with them, your total assets exceed 5k or 10k, or you just plain ask them to waive the fee! There are literally thousands of potential custodians. Talk to three that seem reasonable and make a choice. A beginner can be very happy with just one custodian for a long time. Other differences between institutions that will be your IRA custodian include hours of access, local presence vs mail or internet, internet support, etc. Almost every custodian has materials designed for the newcomer to IRAs. Make some phone calls or surf the net. Ask for this material and an account application, they will help you learn the rules and terms and give you an early clue about the level of service to expect. Add-on? Not sure what you are referring to, but any "contributory" IRA can take contributions once a year, periodically during the year, and in subsequent years. For the first few years, one IRA with one general investment choice is just fine. Keep life simple. I highly recommend that if you plan to leave this money invested for a few decades that you consider a broad based NO LOAD stock mutual fund. An INDEX fund would be a great example of this. Index funds own every stock on a list (like 3000 publicly traded firms or the top 500 S&P companies) and generally have very low internal expenses and a good annual return. You talk about "rates" which sounds to me like you are considering some kind of IOU like a CD or money market account. These are ultra-low risk but over the long haul will just not give you a great total return. Near risk free investments do not offer a great return because in a free market system, they just don't have to bid very high to get money. IOUs do not typically have any kind of growth component. If you don't understand about the differences between different "asset classes" (stocks, bonds, money market, etc.) then you will need to spend a couple of hours with a basic investment text. The longer the hold period in you IRA (and for many people this is 3-5 decades!) the more appropriate for you to have a larger percentage of your assets in stocks. You also say "you recently set one up"? This is confusing as you can not set up an IRA without having chosen a custodian institution, filled out an application and given them a check. Perhaps that sentence got garbled, but understand you must have a custodian acting as your fiduciary to properly have a legal IRA. I also assume that you understand the "earned income" requirements, the $3,000 (or$3,500) maximum annual contribution and the single or married filling status issues. Post again if you have other questions or if I did not understand your question completely.

The above response is not completely accurate. Within an IRA (Roth or regular) there is no distinction between loss vs gain, short term vs long term, or even frequent turnover or hold forever. You can not offset taxable gains/income on your federal return with "tax losses" within your IRA. The tax consequences primarily occur in two ways: (1) you start taking normal distributions, or (2) you have very unusual circumstances and close ALL of you IRAs. See a Motley Fool article on this option at: http://www.fool.com/taxes/2002/taxes020222.htm Under #1, there is only a tax consequence if the account is a standard or regular IRA, there are no tax consequences to normal retirement distributions of a Roth. So, your losses only reduce the total assets and therefore you are likely to pay lower taxes on the distributions... albeit many years in the future. You may have the option to claim a loss under #2, but few will qualify, find it worthwhile or want to close all their IRAs. The rules governing #2 have been discussed by Barry Picker and others before on this message board. Here is a cut and paste from a prior post: From Publication 590: "Recognizing Losses on IRA Investments -- If you have a loss on your traditional IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all your traditional IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis, if any. Your basis is the total amount of the nondeductible contributions in your traditional IRAs. You claim the loss as a miscellaneous itemized deduction, subject to the 2% limit, on Schedule A, Form 1040." {this should apply to Roth and regular IRAs} Note the key elements: you must withdraw ALL of your IRAs and even then you have the Schedule A restriction. AND you also have that 10% penalty for early withdrawal. You lose the tax shelter, incur a penalty and are limited in that loss you can write off. I just don't think many people will find this second approach attractive. If you think this might make sense (you have HUGE losses all in one IRA account for example), run it by a knowledgeable accountant or tax specialist. Sidebar: there are also no special reporting requirements for either IRA accounts related to trades. Just keep the records you need to monitor your investments. No schedule D for IRA transactions. I sure hope that you will ponder the investment decisions you are making. IRA investing is not equivalent to going to the track and betting on the ponies. You don't need to find 50% or 100% annual gains to be successful. Grinding out a 10 or 11% average annual return will often allow you to reach your goals. If you plunked most of your assets down on just one investment then you are not diversifying and increasing your risk. Hopefully, you have learned some valuable lessons with for the "tuition" that you have paid.

I doubt that you have a financial advisor, so I will assume that role for the next three minutes and type fast. No charge! Thanks for the background info. No credit card debt is good. I assume by what you say you have no car payment which would also be good. The 6K is a good start on "reserves" but it needs to be bigger, so that is something to start doing now. I assume that you work, but info on what type of job and how far you have persued education would be helpful since there is a big diff from just HS to already have the BA.... Getting a solid education will help you increase your income and should be a very high priority. I would not wait until you have saved more money, college loans, work study, scholarships are all options you should investigate. I am a little surprised that your Templeton investment is flat or down after 6-8 years. The last three years have been very negative for almost all investments. Prior to that you had almost a complete decade of great years. So goes the stock market... up and down... with a long term trend towards up. A Roth IRA is indeed intended to be a long term investment account. If you have "earned income" (a paycheck) then you should qualify for a Roth. You may want to consider starting one with a regular deposit from your checking account. For example, you might be able to tolerate $100 per month. I would suggest a broad based mutual fund, perhaps an S&P500 index fund. You might also sell your Templeton fund and start with the proceeds, if the fund has not grown much you may even have previously paid capital gains that will translate into a tax loss in the year you sell. Templeton should be able to explain this to you. You should be looking for a NO LOAD fund that has either no or a small (under $20) annual IRA fee. One good article: try the March issue of Consumer Reports which each year has some laypersons articles on mutual funds and retirement accounts. Age 21 ! Congrats on thinking ahead. You may want to subscribe to Kiplinger Financial mag which does a great job for people in their 20s covering investment basics, credit, insurance, and other basic financial issues. Time is up. Good luck. Post again if you have other questions.

You may be confusing what was said about buying mutual funds at the year end in a taxable account.... this does not apply to IRAs. It is all related to capital gains distributions that often occur at year end. With IRAs and Roths, all things being equal, you want to put the money into the account early in the year. Early contributions will typically give you a larger nest egg. The reason is because your funds will be sheltered longer. However, dollar cost averaging or making contributions when you know that you qualify are other valid reasons for different contribution schedules. One reason for not waiting to the end of the year is that IRA departments get jammed in December. Same with April. I would totally ignor the stock market conditions in making decisions about when to make contributions. Life is short, don't spend too much time thinking about the timing of contributions.

Custodians have procedures to handle these problems. Call them and get the process started. If you have any doubts about your qualifications for the IRA to begin with, consult your tax preparer or accountant.

I can't comment on sharebuilder. You can get your IRA transfered to any institution that is willing to be a custodian. The integrity of the account is preserved by a custodian to custodian transfer. The key is that you can only use someone who is acting as an IRA custodian, if you have any doubts ask the potential institution. Any money flowing to an institution that is not acting as an IRA custodian may create a taxable distribution. No ever institution will act as an IRA custodian, but you have thousands of banks, mutual funds and brokerages to choose from.

Before you take any action, please examine the documents you got when you opened your account, or call the custodian. Some mutual funds and other IRA investments have penalty clauses if you terminate early. For example, your broker may have sold you a back end loaded mutual fund. If you must liquidate the fund before moving the money to another custodian, then you might lose a significant chunk. Some back end fees decline over time, so waiting a few years might eliminate this problem. If your IRA holdings are just standard stocks and bonds then you should not have this problem. Get this clarified before you act. You need to separate the question of good custodian from good investment. Sounds like your biggest beef is with the lack of customer service. Second, you can always take "new money" to another custodian and let the initial IRA funds stay with broker #1 for a while. Have you spoken with the broker directly about your concerns? I would start there, and possible request that someone else at the firm handle the account. This might solve your problem.... at least it is worth a phone call. If you clearly want to move your money then this is the best proceedure: (1) talk to a few potential custodians about their investment options, services, and fees, (2) select one custodian, (3) fill out the paperwork at custodian #2 for a direct transfer and let them make the contacts. Usually the second custodian can do just about everything using a copy of the recent IRA statement. DO NOT ask for a check and close the IRA as this opens the door to a host of problems. The custodian to custodian transfer avoids most of these problems. You just monitor the process to make sure it is done correctly.

Sorry about not being clear on the mutual fund capital gains issue. At the end of the year, all mutual funds must calculate the interest, dividends and capital gains that occured over the 12 months. In an active growth fund, there might be considerable turnover (purchases and sales of stocks) during the year. The mutual fund passes the tax liability for these to the account holder. If you have an IRA or Roth, there is no impact since you do not have a taxable event. However, if you are doing a standard taxable investment you can have a tax liability even if you did not make a change in the amount you had invested. For example, if you buy a mutual fund in November, you could have a taxable event the next month. Since index funds have very little turnover (usually only when a company is deleted from the underlying list) and tax managed funds are often manipulated to reduce capital gains, they can reduce the year to year capital gains. However, the account holder should have a long term capital gain when they eventually sell their mutual fund shares. You are correct that you want capital gains. I should have been more clear that you only want capital gains when you act to change an investment if at all possible. Defering a taxable event keeps more money at work for you. Index funds and tax managed funds can be helpful in that regard.

1. You have a extraordinary 403b! 2:1 is a great match so participate as much as you can. 2. A Roth is a reasonable alternative for extra money that you wish to invest. However, you also need to think about building up some cash reserves and future law school expenses. I suggest that you read IRS Pub 590 about using Roth assets to pay for school. You should clearly be socking away a large part of your salary in the next few years. 3. All other questions are too far in to the future to accurately tell you what you will be allowed to do. Rules change. There may also be some interaction between where your assets are located and how law schools might evaluate your financial need. For example, some schools specifically do not look at retirement accounts! I would wait a few years and then research your options. 4. One a Roth is created, you do not have to change it if your income qualifications change. Those prior contributions are OK. Qualification is based upon modified adjusted gross income and filing status. Qualification is separate for each year. 5. Yes, you may want to do a conversion of non-Roth funds in a year when you are a student because your income tax rate will be near zero.... but that is a long way off and those rules could change as well. 6. My daughter is getting ready to apply to law schools. Here is a great web site for schools, testing, financial aide, etc. http://www.lsac.org/LSAC.asp?url=/lsac/law...gLegalEducation

OK, at age 28 you have a lot of years of investment growth and a Roth is a great tax shelter. The maximum you can contribute is $3000 assuming that you meet the qualifications. Just pick a broad based index fund like some of those offered by Vanguard and contribute each year. After 5-10 years you will start to get a decent size nest egg and can think about your choices again. Monitor your IRA about 4 times a year and check after each deposit that it is properly posted, but let the investment ride regardless of what seems to be happening in the stock market. This is a low maintenance approach while the "lump" is relatively small. Over the next decade you will acquire more investment knowledge and later on may consider other decisions. An index fund or a tax managed fund is a reasonable choice for extra investment. These two types of funds have low turnover of holdings and therefore produce low to zero taxable gains each year. For example, Schwab has had a tax managed "1000" fund that I believe has never had capital gains at the end of the year because they sell a few losers to wipe out the few gains. Pay down your mortage? This is a common idea that is probably not in your best interest. Money is currently "on sale". The cost of borrowing is discounted because of very low interest rates. Normally, in a store you tend to buy more of what is on sale. Paying off a mortgage early is selling not buying. In a time of cheap money, you want to take advantage of low interest rates. What would you do if borrowing cost 1% or nothing? It is better to have a low interest rate mortgage than any credit card debt so this is the exception - worth paying off early. Paying off early a car loan is a bad idea because most lenders build in higher interest rates on the front end - I think it is called the Rule of 98. Paying off a college loan early may be a bad idea if your interest rate is low. Some people get strange notions about borrowing money... maybe it traces to biblical missives, Shakespeare quotes and family stories about burning the mortgage. But in an era of modern finance, there is nothing wrong with borrowing at low rates if you can afford the payments. Look into refinancing instead. Owning rental properties can be a solid investment if you have the personality for dealing with renters and are handy at fixing things. Read some books about it before you start. Trial and error learning in real estate gets very expensive so you want to avoid the more common pitfalls. More than a few friends got started in this only to found out that they did not like dealing with "problems" which included strange renters (I am only a little late! and its a friendly dog) and a host of unpredicable equipment problems. I also have some buddies that are doing just what you suggested and are extremely happy with the results. The perfectionists seem to have the worse problems because being a landlord is "messy". I admire your ambition and your thinking ahead. You are a huge step ahead of most folks your age. Good luck.

Answering your question without knowing more about your circumstances could lead to a very misleading response. Please post again and provide a little more backgound. If you are 25 years old and just getting started, the answer would be dramatically different then if you were 75 years old and just establishing a comfortable payout stream. A Roth investment is generally a very long term arrangement. I sure hope you are not looking for 5% annual for decades, that would be wowfully underperforming almost every kind of investment. Your choice of custodians included banks, brokerages and mutual funds. If, by your question, you are looking for a guarenteed return you are out of luck. CDs, probably the single worse long term investment you could choose, are yielding under 5% for most maturities. You could choose a bond fund or buy some dividend driven stocks (or similiar funds) that would hold utilities and old blue chip firms. Please provide some additional details about your age, objectives, approximate asset size and investment knowledge so we can give you a better answer.

The main choices for custodian of an IRA are banks, brokerages and mutual funds. Yes, the types of investments that are offered vary by custodian although it seems like the trend is for a growing overlap in options. Even within a broad class of custodians you will find a range of investments options. Banks: they may offer just CDs (common for example at a small thrift) or they may have in-house mutual funds or even some kind of brokerage tie. Banks generally offer the more conservative investment options. They are local and offer counter service, but a lot of banks lag in "modern" services like internet access and may not offer a complete range of investment options. Brokerages: traditionally brokerages started with an emphasis on advisor-makes-the-picks style investing, but this has involved into self directed stock picking, discount services and finally internet pick-by-click. Brokerages also used to sell LOADED funds, but this has evolved to brokerages offering hundreds of LOADED and NO LOAD mutual funds (like Schwab and Etrade). Today, most brokerages offer a range of services (with a range of costs) that run from do it yourself intenet to full service hand holding. The later is ussually a much more expensive option. Brokerage access to mutual funds start with their in-house funds, but access to the funds of other firms depends upon the deals they have struck with those firms. Some mutual funds do not want to participate in the cost share and choose to be independent or brokerages. Others like the "recruiting" that the brokerages do for building their asset base. Mutual funds: a mutual fund in its simplest form is a company that offers participation in a cluster of investments (called a portfolio, could be stocks, bonds or other investment options) where the citizen gets ownership in a diversified package. There are thousands of mutual funds, often clustered in "families" like Vanguard, Fidelity, T Rowe Price, Scudder, etc. They key issues with mutual funds include: FUND FOCUS: like Baskin Robbins ice cream, mutual funds come in many flavors with a key distinction being what is the allowed investments or fund focus. There are also structural issues such as LOADED vs NO LOAD. LOADED mutual fund refers to any fund that has built in commissions either on the front end or back end. NO LOAD funds have been slowly displacing LOADED funds as modern marketing and economies of scale take over. The NO LOAD fund has annual expenses, but no percent commission. In theory, a LOADED fund has a commission to pay the "salesperson" and these commissions used to be 5-7% up front. Market pressure has forced many LOADED funds to trim those costs, or hide them as back end fees (when the account assets are larger!) or dangle the phased out fee system (commission drops if you stay with the fund for many years). An INDEX fund is a fund based upon a list (like the Wilshire 5000 stocks or S&P 500) and therefore no analysts, no company visits, no hotels/meals/flights, etc. which are reflected in significantly lower annual expenses. As a person just getting started, you need to avoid getting confused by the thousands of choices. A beginner IRA owner needs just one or two good investment vehicles. If you are young, I highly recommend starting with a broad based equity (aka stock) fund that is NO LOAD. The Vanguard Index funds are reasonable examples of this, but many mutual funds and brokerages offer similiar funds. I recommend a NO LOAD fund because you are not stuck with fees if the fund performs poorly. I recommend equities because the stock market over many decades reflects the growth and success of capitalism and gives a better return than IOU based investments like bonds and CDs. I recommend starting with one fund for perhaps 5 to 10 years because a fund gives you diversification, removes you from single stock picking, and is relatively low maintenance. You have a life to live, and when you IRA assets are relatively modest, why spend hours thinking about investments. It just isn't neccessary. It may seem crazy, but people who spend a lot of time thinking about investments are not likely to out perform an index fund. The reason is because the extremely low annual expenses drains off very little of your assets, while frequent switching often increases annual expenses and folks have a nasty habit of selling low (in panic, like right now) and buying high (in euphoria like the late 1990s). Smart investors stay detached from market emotion and do just the opposite: buy low and sell high.... or atleast they try to, it is just not very easy to figure out what is high and what is low. You do not need to put the maximum annual ammount into an IRA to get started. You can do a monthly fixed amount, or a single lump, or periodic small investments...the choice is yours. The Roth is an excellant tax shelter for building wealth. I suggest that you ignor the daily/weekly/monthly investment "news" and commit yourself to the big picture of building a retirement nest egg over the long haul. I have friends who have built IRA accounts to hundreds of thousands and even millions of dollars and in many cases spent less than four hours a year thinking about "choices". Getting started is more important that what specific investment choice you make. Over time you will learn more about investing and be more comfortable with the decision process. You can't get there if you don't get started. Post again if you have additional questions.

Maryu, it is unfortunate that you paid taxes on the conversion beyond what you owed. For other readers of this message board, one lesson to be learned is that conversions (even relatively small ones) should be done with the advice of a tax preparer or accountant as the eligibity, procedures and tax consequences are complicated. Sadly, we see way too many posts of conversions that were not executed properly or done unwisely.

How do you get started? I suggest that you select three potential custodians. Ask them for their basic "getting started" materials including application forms, "how to invest", summaries of the key funds/options. Evaluate what you get and make a choice. Talk to the firm, ask them your basic questions. If you are satisfied, open your accounts. Note, you will have two separate accounts. One for yourself, and one for your wife. They are "individual" accounts. Each custodian has different rules governing annual fees. Many custodians charge none, especially if you have other business with them or if your accounts grow above a set amount. Some custodians do not charge an annual fee if you subscribe to a monthly contribution plan. In addition, you can often ask for them to waive the annual fee. If you are dealing with a custodian that does charge a fee, you may be able to pay the fee with an outside check. After you put money into your Roth IRA, you often must make a second decision on where the funds should be invested. I would recommend that given your long likely hold period that you invest in equities (stocks). No one can tell you if the current stocks prices are high or low, nor can anyone I have ever met tell you when the market is about to change direction. Don't get overly concerned about the "snapshot". You are investing for multiple decades and over such a long hold period, stocks will tend to outperform CDs and bonds. I have suggested a broadly based index mutual fund because this gives you diversification - you are not picking a single stock but a broad cluster. Should you put in the max? Well, if you are flushed with money that has no other home, then why not. The Roth is a wonderful tax shelter. But remember, as a new father you want to be sure to have a significant number of "protections" in place. For example, I would suggest 3-6 months cash reserves. I would also recommend that you get a TERM life insurance policy, perhaps for a 1/2 million. You should also consider if you need disability insurance. If you have satisfied all these areas, you are in a good position to put money into a Roth. Remember, this is money you are not expecting to tap for decades. On Housing: The tax free retention of gains is only for houses that you occupy for at least two years and then sell. All other construction that is built and sold will create income... and your accountant will suggest how it should be handled, including if the time period makes a difference. You clearly do not have to hold a house for two years before you can sell it. The two year period only refers to the tax status if you occupied the house as your primary residence.

You are doing a lot of good things financially, like no bad debt and using your skills to build home equity. I would suggest that you talk with your non-profit and see if they can take the next step towards a retirement fund. In some areas, the non-profits have a collective program... many small non-profits using the same system and keeping overhead minimal. You also should be building a cash reserve for the unexpected. ROTH IRA: Yes, this is a very valid option for you if you want to set aside up to $6k a year, half for you half for your wife in separate accounts. Initially, you do not need to spend a lot of time focusing on investment decisions if you elect an broad based index fund. Vanguard is a very good choice since their annual expenses are extremely low. The S&P500 version would give you general market performance and you would not have to spend a lot of time thinking about investment choices. Perhaps 5+ years down the road when your assets grow you may want to tinker with your choices, but that could be even put off for 10+ years. Since you are a busy guy, saving time should be worth something. An index fund will mirror the unlying market on which it is based. You therefore should get standard market performance... and over the long haul, that is perfectly adequate. The Roth would add some diversification to your growing assets. You do not have to put the full amount in each year, perhaps you should consider an automatic withdrawal program to put a set amount each month from your checking account into a Roth. REAL ESTATE GAMES: Something else to think about. If you build your own home with some sweat equity and live in it for two years, you can then sell the home and keep the capital gains. Then start over and do it again. Your wife might get irritated with the frequent moving, but you do get to live in a new house all the time. No ssn, no income taxes. There is a fellow in Denver who is doing this making over 100k each year and paying no taxes. Given your background in home construction, this is another option for you. The "gain" is not subsequently tax sheltered, but the recent tax law changes on home sales gives you some options that just where not there a few years back.

Answers: 1. If your combined modified adjusted gross income (salaries plus other income sources like interest and dividends) is around $120K and you are married filling a joint return, then you both qualify for a Roth IRA. If your modified adjusted gross income is between 150k and 160k and you are filing a joint return then you are in the "phase out" zone. Above 160k you can not contribute (in that year) to a Roth. Eligibility is determined each year, contributions made in a year when you are eligible are not affected by a subsequent change in eligibility. 2. IRAs are maintained by a custodial institution. The most common custodians are banks, mutual funds or fund families and brokerages. The choice is often influenced by convenience, type of investment you plan to make and annual fees (which can be zero). If after opening a Roth account, you decide you want a different custodian, you can then do a custodian to custodian transfer. Scottrade and Ameritrade both support IRA accounts. You can learn more about Roth IRAs at this message board and also the www.rothira.com web site.