John G

If you are not able to deduct the IRA (or even if you can), you may want to consider a contribution to a Roth because they have no required distributions and the Roth has some attractive inheritance options. If your income tax bracket is low and you do not need distributions from an IRA now, you may want to consider a conversion from regular to Roth IRA. You would not be forced to take any distributions from the Roth and again might have some attractive inheritance options. Since this is a complex issue, you should ask an accountant or tax preparer for advice on the details.

Lets be careful about max annual contributions: $2,000 for tax year 2001, $3,000 for tax year 2002 and if you are age 50+ $3,500 for tax year 2002. Spouse account is a separate issue and can be based on income for either adult. All Roth numbers, I assume that you satisfy the earned income and max income requirements. Number of custodians or accounts has no impact, all contribution regulations are evaluated based upon the total for the tax year for each spouse. Besides the fees, simple management/tracking of your money gets more complicated when you split up the assets.

I am a 37 year old male US citizen working abroad ...I am married to a 32 year old ...We file a combined US tax return. My wife pays US income taxes... How can I open a Roth IRA and how can I contribute. I don't believe payroll deduction would be possible. It sounds like both of you will be eligible for an IRA based upon your wife's "earned income" which is reported on her W2. Her income (if more than $6,000) will cover you both for 2002 and allow you the maximum contribution of $3,000 each. Sounds like you are new to investing as well as IRAs. I would recommend that for the next five+ years you keep things fairly simple and use either a broad based stock fund or an index fund for starting to build your IRA. You probably want to select a Roth for the favorable future tax treatment. Your very first step is to contact atleast three potential "custodians" who can set up an account for you. Custodians can include banks, mutual funds/families, brokerages, etc. There are about 8,000 mutual funds... but you only need one initially. Examples include: T Rowe Price, Vanguard, Janus, Scudder, etc. They all have web sites. You could also go the brokerage route. Examples: Schwab, Fidelity, Etrade, Ameritrade, Quick and Reilly. They all have web sites. Each of these would give you access to mutual funds. Why contact three? Well, some may have a problem with foreign locations. Fees range from none to $40+ per year. The range of investments will vary. Ask each custodian to send you information for "just getting started" investors. They ussually have good overview materials. Remember that you and your wife will have separate accounts. I highly recommend equity based IRAs given your age since you will keep these funds building for a long time and you don't want to just settle for a safer interest based return. You can send them a check or wire funds to get started. You may want to snag the March issue of Consumer Reports which ussually covers retirement planning and has a short list of good mutual funds. This is a good place to post questions. Good luck with your research and investments.

Your proposal is unlikely to be allowed. Here is why. You could sell a property below market value to Mr X and arrange a very beneficial mortgage that subsequently pumps extra dollars into your IRA that could never happen if you were not self dealing. Congress has set a limit to what you can contribute to an IRA and the IRS could readily presume that an arrangement that puts more tax free money into your IRA is fraud. If you want a fixed income return, try a bond fund or own individual publicly traded bonds bought on an open market.

Some custodians allow IRA account holders to write a separate check for the annual fees (like Bear Stearns). If you sent them a check designating this as payment for the annual fee and followed the custodians instructions, you should call the custodian and get them to get it straightened out and issue any corrections to you and IRS.

I think sometimes the real estate issue is proposed when a taxpayer thinks it will solve some problem. The simple answer is that real estate ownership via a Roth or IRA can expose you to a lot of problems. It will generate problems, not solve them. And... do you really have the expertise to handle real estate transactions.... and if you get sick or are disabled, does you real estate investment become unworkable? You don't need real estate as an investment to reach your investment objectives. There are 8,000+ stocks and 8,000+ mutual funds and a ton of bonds.... so why make life complicated by trying to do real estate with an IRA? I just think it is the proverbial "can of worms". You also don't need to beat the market to have success if you are in for the long haul. The long run market average for equities is somewhere between 10% and 14% depending upon your snapshot, time period and definition. Blend in some fix rate securities and you should be able to average 10+% which means your assets double about every 7 years. So 3K contributed at age 25 grows to 6k, 9k, 18k, 36k, 72k, and finally 144k at age 67. And each year afterward another 3k contribution grows to 144k in the year following (68). That is a lot of mulla even in future dollars from one simple program. Add on top 401ks and SSN and you may be yachting in the south Pacific.

Roth IRAs have an income limitation/phaseout that depends upon your marital status. When you hit these ranges, you are in the Roth phaseout: Single 95-110k. Married filing jointly 150-160k. Married filing separately 0-10k. Above these income levels, you can not contribute to a Roth. Below these levels (assuming you have sufficient earned income) you can contribute the max amount.

Note, you normally seek to have long term capital gains with real estate. In a regular IRA, all transactions will ultimately be taxed as ordinary income. Which, even if defered, is going up in tax bracket. Plus, you need to ask yourself if the real estate will perform as well as equities over a long haul. I would also imagine that you might have problems if you upgrade the property with your money and then sell it. It would seem to me that you could artificially boost a retirement account this way to a level you could never reach via normal annual funding. When you seek to take money out, you have a very lumpy investment and possibly liquidity issues. Hard to sell just 10% of a home or office.

You can contribute to either a Roth or regular IRA or even both. However, your maximum annual contribution is for the combination of all IRAs in a specific year.

Roths are not tax deductible. The max annual contribution is set for all IRAs combined, not separate limits for Roth and regular IRAs. However, you should know that the limits for the 2002 tax year is $3,000.... or if you are over age 50 the limit is $3,500. These are changes for 2002, the old 2k limit applies to 2001 tax year. So.... you answer for last year ('01) is 2K has you maxed out, but you could put in more if you are talking about this calender year. Get a copy of Pub 590 from the IRS which covers the various IRA and ROTH IRA options.

Are you on the owner side of the equation? As an employee, I would hardly be impressed with this arrangement. I can do it myself, why do I need the employer knowing my personal financial actions? Where is the matching provisions like my buddy gets at Company Z? Hey, that company Z looks like a nice place to work! My company keeps trying to sell me stuff that is supposed to be great for me and its just smoke and mirrors, I get this stuff right now without them. Maybe I should take my buddy up and get him a resume. Just my idea above about how employees might react to your plan. There are plenty of simple arrangements that employers can support using third party plans. Ask your accountant to go over the options.

If the last question is directed to me.... no. There are lots of good systems for rewarding employees, building up nest eggs, providing an incentive for folks to stay, etc. Like 403b, 402k, pension/profit sharing and "thrift" savings. IRA seems like a very akward approach to me.

Since, individuals can sign up for automatic deposits to an IRA from a checking account, why would a company want to insert itself into the process? You could not force employees to participate. I am not sure why a company would want to get involved. The individual automatic deposit is very straight forward, so you could hardly argue that the firm would be simpifying things. You are dealing with after tax dollars, so there is no pre-tax advantage that some other corporate linked investment options would have.

It sounds like your tax preparer incorrectly handled your taxes. From my perspective, I think the onus to file corrections for prior years falls on the preparer. You should be made whole, atleast for the screw up in the conversion part. The choice of regular vs Roth is not so clear if you did not or could not take the decution. If your tax preparer is a major vendor, take this matter up with a supervisor. If it is a single accountant in private practice, you may have a problem with "motivation". An ethical practictionare would volunteer to correct the mistakes. I hope Barry and the other accountants will comment on this issue. Limited or flawed tax preparer expertise is a problem that comes up too often.

Since the prior amount was rolled into the IRA, your conversion math will be based upon ALL your IRA assets in all accounts and all locations. You can not cherry pick specific assets to convert. Everything is done on a percent basis of the combined total IRA assets. In your circumstances, it sounds as if some of your IRA should not have been taxed when converted. Given your complex situation, I recommend you find a qualified local tax accountant familiar with rollovers and conversions to assist you. It is easy to make some mistakes.

Your posts show some confusion about the various options. I think you may be best served by just keeping things simple. Open the Roth for 2001 (and fund as well for 2002 now if you wish) as long as you meet the income qualifications. Clean and tidy. While you might take the deduction option for 2001 with a regular IRA, when you later convert you will have to pay taxes on the full contribution PLUS all the earnings that may accumulate. So lets say you wait some years and your assets double... you might then end up paying taxes on $6,000. You also may run into the problem on not being able meet the income qualifications in future years. Another possible negative is any adverse change eminating from Congress. Simple does have some advantages. The taxes you might save on a tax bracket difference are probably in the $300 range assuming a $3,000 contribution and a 10% tax bracket delta. There are a lot of "ifs" built into that approach. Life just might conspire against it working out.

I concur with the above. Under the current rules, you can have one account collect the various Roth sources. However, Roth and regular IRAs still do not mix. Neither can you mix or blend the accounts with your spouse.... So, each couple could easily have 4 IRA accounts, one Roth and one Regular for each adult. Add a few for kids, flour, sugar, and salt and you have.....

1. T Rowe is a decent mutual fund company that has lots of no-load choices. 2. The plan you are probably talking about is the monthly direct deposit option. This is essentially a dollar cost average method of funding your IRA. Plus side: you buy a fixed amount each month so you buy more shares on a down month automatically and buy less on a high month. Some custodians will waive the annual fees or reduce the initial deposit amount for anyone electing a regular direct deposit. Negative side: you can get a longer amount of time in the tax shelter by putting all money in early January. 3. As someone just getting started, I would recommend that you pick a very general fund with a broad array of stocks. Avoid the highly specialized funds. An index fund is especially attractive because the internal annual expenses take less of a bite out of performance. Good luck

Three suggestions: (1) just wait a while longer before buying a home and save aggressively, (2) look to a short term family loan from a parent or aunt/uncle and (3) talk to local realtors about first time home buying programs which often have extra incentives built in. The 401k/roth option is messy, erodes the value of your tax shelter, and after taxes just does not yield very much for the trouble.

Looks like you just entered the "phase out" zone for deductions and exemptions. If your math is correct, you are stuck. Be happy that you got the 4 year average, which is no longer available. The first time you see those odd exemption and deduction values it is often a shock. You just joined a small club of successful families. The pain will go away next year. You may want to have a tax professional review your math.

If you are refering to the "education IRA" have mis-information. You may find the following from a Salasko article in the othira.com web site: Contributions of up to $500 per beneficiary may be made to an Education IRA by married taxpayers with "modified" AGI below $150,000, and by single taxpayers with "modified" AGI below $95,000 [there is a phase out]..... An individual may be a beneficiary of multiple Education IRAs, and beneficiaries need not be dependents of or related to the contributors. The IRS is taking the position, however, that the total contribution per beneficiary per year cannot exceed $500. Contributions, which are not tax-deductible, are in addition to the $2,000 combined limit for traditional, nondeductible, and Roth IRAs. Contributions will qualify for the annual $10,000 per donee gift tax exclusion.... Note, NO deduction for the education IRA. Concerning the church activity: donations to a church normally qualifies for a deduction if you itemize. However, ANY time you make a donation and then have a personal benefit you should not take a deduction. A similiar situation: giving a cash donation to your local high school which turns around and gives your kid a scholarship. You are not supposed to derive any direct benefit for a donation. I am not going to say that other folks may not try to claim a decution, but I would not. If your tax preparer does not know the answer to these two questions, then you should find a better trained professional.

Bad news: you are over the Roth income limit as your tax status is determined not on percentage basis but on the last day of the year. Married filing jointly has a max income of 160k. Married filing separately does not help you either. Good news: with that combined income you are in about the top 1% of all US families. Perhaps you can reach your goals within corporate plans like 401k or 403b. You should consult a tax specialist or accountant who can give you some ideas on investment planning. You would be a very wise couple if you could salt away 20% of your annual income. Some suggestions: to reduce annual tax bite, consider either buy and hold long term individual stocks, but a tax managed mutual fund (they sell losers to erase capital gains), or and index fund (which has little capital gains because of very little turnover). You have a lot more options with things like pension/profit sharing plans if either of you own a business. Good luck with you new married life.

Making a conversion during a period of low income helps you two ways: meeting income qualifications and potentially keeping your tax rate low. It is not a "rollover" but a Roth conversion... although the transaction is similiar to a rollover in that you move all the assets from the existing IRA to a Roth account (new or existing). However, you must convert during a calender year for the year in which you qualify. You want to do this before the last 2-3 weeks in December to make sure it happens. You missed 2001, maybe the math will work for you this year.

In 2002, add $500 if you qualify for the retirement "make up" period at age 50+. So for some people the max amount in 2002 may be $3,500.

See this link: http://www.benefitslink.com/mbmirror/12458.html Also note Barry Picker has at least one article on this subject posted at www.rothira.com It is a sad commentary on the last two year investment results that this question comes up so often. But, markets rarely are down three years in a row, 2002 looks like an up year to me.