John G

My take on this end-run goes beyond the annual 6% penalty. Since the Roth was artificially created and not based upon meeting the income limitation or earned income requirement, I would expect a court ruling that the assets are therefore not a Roth and do not receive the tax shelter benefits. You may also find that your accountant will not knowingly participate in this strategy. Mine would politely ask me to find another accountant.

Bad idea - on both counts, lack of earned income and total income. Flagerent disregard of the tax code, IMO, could open your returns up for a more thorough examination. Other options: You can look for some tax loses (in a year like this, surely you have something that went down) and sell it to offset some of the cap gains to bring income under ceiling. You can talk with your accountant about structuring a business with payroll for yourself and your spouse, either one working is sufficient. Talk to your accountant about other options for tax year shifting of income. Do not try to end run the IRS to create a Roth. If your accountant sees no way for you to qualify, accept his/her advice.

IMO..... Why does anyone want to pay off a mortgage early when the interest rate is super low? Money is on sale right now. Don't you ussually buy more when the price drops? Well the price of money is as low as it has been in a couple of decades. Sure you can set up a spreadsheet and work the math making lots of assumptions about investment returns, taxes, deductability, real estate appreciation, etc. The simple answer is when money is extremely cheap to borrow, take advantage of it. Borrow and pay back very slowly. You have indicated that you have the discipline to invest the difference, a plan with which I concur. {same logic applies to below market college loans which should be paid back slowly.... just the opposite is true of high interest rate credit card debt which if not avoided at least paid back quickly} Use your Roth as a Roth. It is a great tax shelter and wealth builder. I would seek to max out Roth contributions for any year that you and your spouse qualify. Then any extra into an index fund or equivalent investment. Note: if you invest in an index fund, your year to year tax liability will be relatively low or zero (example Schwab 1000 a tax managed index fund, 9 years of zero tax liability) and when you eventually sell you will have long term capital gains.

Pax, that really was a good link.... we covered some really good issues in that series. John A, debate was a poor choice of words, we have a good flow of ideas. On donation to others, I agree. For those just getting started, perhaps the best donation is their time. Community service gets you out of the 9-5 thinking. You meet new folks and gain a different perspective on your life. Folks that cause trouble (like those two guys at Columbine) rarely have altruistic activities. Being self centered is about the most boring thing a person can do. For some couples this can be church related, for others... help in a recycling center, volunteer at a local school (Junior Achievement, reading assistant, coach), work in a local park & rec center, help out in the local hospital. Some of my best hours each week is spent trying to teach practical economics to junior/seniors in local high schools... it is a great challenge. Donating $$$ is also helpful, especially when you accumulate some major bucks. Got more than milk? Like appreciated assets held for more than one year? Check the charitable gift programs at Fidelity and Schwab. Transfer 1000 shares of stock, take the full right off in the year of transfer and then you have a pool of money from which checks can be sent to various agencies. Like a mini Ford Foundation. I think it is either 10k or 20k to get started. Very cool. I look around at some families and see that the "heirs" can be the worse group to show with money.

The "at retirement" issue.... When a person gets to that magic age, they shift from payroll coming in to using a combination of pension, SSN and retirement assets. At the age of 65, most folks would clearly expect to live 20 more years if they are in good health. This could mean they are not going to touch even 10% of their IRA accounts in those initial years. Often, the IRA assets are not taken until forced MDR. This means that the bulk of the assets will be working for 10+ years and it makes sense to keep a portion invested in equities. Of course, not everyone can tolerate the annual flucuations. I am advising a 78 year old woman who was put into high tech funds by those loving folks at Morgan Stanley Dean Witter. They are going to lose the account because of that foolishness. She could not sleep because of the havoc with her retirement money. High tech, international telecom, etc. Very bad choices. Good choices could have been a general market index fund, growth and income or dividend based fund. I do not disagree that as you get older you start to change to focus of your investments. But not the day after you retire. It should be a very careful and gradual change. If your assets vastly exceed your needs, you can take more risk. If you just have enough to meet your retirement goals, then you want to risk much less. Nicki, don't worry about this debate. Your first goal is to get started. You will learn by doing. Don't worry about what your return is over the next few years. You are playing for the long haul. You probably paid a lot more in tuition for knowledge that may not be useful when you were in college. Suggestion: subscribe to Kiplinger Financial mag and spend 1-2 hours each month reading the articles.

I don't understand annuities in a Roth. They generally have higher expenses and no real tax advantage. Lack of time to study individual stocks is a very good reason to look at a broad based mutual fund. Vanguard has the added advantage of extremely low annual expenses, way below other mutual funds. Since annual expenses take away from your gain, a very low rate is a good thing. Going the index route means you will get approximately market returns. You are exposed to general market risk, you rise and fall with the overall market but with low expenses. Since index funds beat about 80+% of all mutual funds each year, this is a very strong option. Sure there are dozens of funds that can sometimes do better.... but no one knows which funds will do better in what years. You don't need to be in the top 10% of all funds to have a very respectable showing over a multiple decade time horizon. And of course, the review of fund options also takes up time. Let your assets grow using one of the broad based index funds and later on when you are more comfortable with individual picks you can consider changing your strategy.

Nicki, you can do the math using an HP 12c calculator or any general spreadsheet. The variables are N (number of compound periods), PMT (contribution in each period), and I (interest rate). Lets use ROTH IRA as an example for you. I will assume that you contribute until you retire at 65 (33 years) and hold a broad portfolio of stocks, such as an index fund and using 10% for annual appreciation. If you invest $2,000 each year you have $444k at age 65. If you and your spouse both invest $2,000 each year, just double that to $888k. If you bump up your contribution to $3,000 and your spouse does the same, then you hit $1,334k at age 65. Yes, 1.3 million in year 2034 dollars. Allowed IRA contributions are moving up to 5,000 so you can run some additional scenarios. You also will end up with a better result if your annual appreciation climbs just a little over 10%. To convert any of these numbers to todays purchase value, you divide by (1+inflation)**N. That's and expotential equation easily solved on most calculators. I would suggest 3% as the long run inflation rate.... so (1+0.03)** 33years = 2.65 Dividing 1.3 million by 2.65 says that in today's purchasing value you tax shelter is equivalent to about a 1/2 million in today's dollars. John A offers two valid points. First, your actual return will vary from year to year and so this estimation technique is crude. I agree. Second, much of the gain in assets occurs in the final few years when you might shift to more conservative investments. This also may be true. The rule of 72 says that with 10% a year appreciation, your assets double approximately ever 7 years. Therefore, your target total is 1/2 with 7 years to go or when you are 58. Your target total is just 1/4 with 14 years to go when you are 51. Where I would disagree is that at age 51 or 58 you are likely to have many years of work followed by even more years of retirement. Therefore you should not shift dramatically away from stocks with a few years to go to retirement. Once you reach the age of 65, your odds of living another 30 years are significant. There are other keys to buiding wealth: (1) choose you spouse carefully, long term married couples are more successful, (2) participate in corporate retirement plans that have a matching component, (3) utilize the long term value of homeownership to build equity, (4) consider starting your own business if you have the fortitude and can-do attitude, (5) build a tax sheltered asset base using Roth IRAs, and (6) stay with your plan, time is an investors friend. I am not a big fan of Suze... she throws numbers around a lot for dramatic effect and leaves out the details. If she set off your internal alarm that motivates you to become educated about investments and get started, then that is a good thing. Don't think age 32 is too late to achieve great results. Good luck.

Another way to look at "penalty" is to consider the opportunity cost of a Roth withdrawal. The Roth is a tax shelter and there are qualifications to participate and limitations on how much you can shelter. If you withdraw funds from a Roth, you a busting up one of the best tax shelters the average citizen can use. If you were retiring next year, the damage would be less than if you have many decades of asset growth before you might withdraw. So the IRS 10% is not the only negative. Spend it now, spend it later. That is the tradeoff you are considering. Perhaps there are other options such as changing the timing. Or, internal family financing? Your mom and dad might appreciate a return above the current CD rates, which might beat the home equity loan you are considering. You might want to consider rent vs own on the second home. There seems to be lots of second home owners that need the extra income to justify #2 dwelling.

MCD, I commend you on providing service for you clients, it is getting more rare every day. And at no charge in this case! Sure it is just a journal, but I know lots of custodians would look at an in-kind request as either a "fee opportunity" or a customer nuisance they would like to ignor. There are a lot of firms that put IRA actions in a que that can take many weeks. We saw this frequently with conversion requests. Perhaps you should identify your firm, you might get some business.

When Roths were first created a few years ago, there were some technical distinctions that caused distinctions between conversion and contributory accounts. Changes in the regs has caused this annoying problem to go away. Most custodians know this. Either: (1) your talking with someone who is not current on the rules, or (2) your custodian just never bothered to correct their internal rules. Ask to speak to the backroom IRA department. If they don't agree that you need just one account you can always find another custodian.

Some responses: 1. I am aware of just a few niches that have produced ST stategies that were successfully used to grow IRA assets. These are very rare. They took work, planning and lots of time. Your not likely to find one if you are looking for an ST, the four examples I can think of were accidentally discovered. None involved leveraging of any kind. ST in these cases meant 2 to 15 weeks, not hours or minutes. 2. Big IRAs, I know of a few that have past 5 million and one past 10 million. Since these involve investors who are around 50 years old, they could become mega assets in the future. None were grown purely at 2k a year, all involved 401K or pension/profit sharing plans that rolled over. I would imagine that big IRAs are still extremely rare. Many of these IRAs are regular rather than Roth. As regular IRAs grow, at some point investors are likely to choose the more favorable long term capital gains of traditional taxable accounts. Remember Roths are both new and conversions have had restricted income levels. It takes a lot of creativity to slip under the income limits if you are a high asset / high income household. And atleast in my experience, high asset households do some great charitable things with their assets.... I view it is an obligation of those who benefit mightily from capitalism act to address some of the individuals and issues that get overlooked in our short planning horizon. 3. "Excess accumulated tax" - don't count out the cleverness of those in Washington when the so called "budget surplus" vanishes. You still have alt minimum taxes and the estate tax comes back in 10 years. The only real protection for Roth IRA accounts to remain tax free is the proliferation of voters who believed in the Roth promise. Like AARP, there is power in large numbers of participants. 4. Restrictions on leverage are related to the inability of an IRA owner to just pump more money into the account to make up for a leveraged loss. You just won't find any investment that has unlimited liability (like short selling) that will be allowed in an IRA. The issues you have raised are just not very likely to apply to the average investor. You talk about ST strategy as if it was a sure thing. I have never seen a sure thing in investing in 20 years. Sure things mean big red flags to me. Investors rarely get burned over the stuff they know, its ussually what they don't even think about: "asian flu", war, mgmt fraud (like with overstated earnings at RAD), unexpected technological competition (genetic solutions trumping pharmaceuticals), tylenol tampering, mgmt miscues (Quaker Oats high cost acquisition of a trendy ice tea maker), top gun bolts, etc. If you have high confidence in a ST strategy, you are likely to concentrate your assets which exposes you to much higher risk of failure.

Thanks Barry. I guess a good conclusion is that while technically possible with some but not all custodians, in-kind transfers are likely to be messy, soak up time, possibly involve extra fees and may be inaccurately completed. I don't think I would ever go that route. Barry, you are right on target about seniors and the internet based brokerages. I see a lot of folks past the age of 65 that still have the stock certificates in the safe deposit box. It took me four years to convince my parents of the value of a brokerage account to automatically track splits, spinoffs, mergers, dividends and of course provide a daily cash sweep. There seems to be some underlying trust issue concerning paper vs. electrons.... a generational thing.

It would seem that the primary reason for doing this is to avoid a sales commission and a purchase commission... and possibly a small "spread" between bid and asked. In an era of internet based trading fees and tiny spreads, the transaction costs would not seem to be that imposing. For example an 8% distribution from a million dollar IRA would be 80k or 180 shares of GE which would might require a 2x trade that would still total far less than $100. Arguing against this position is the odd lot amounts and difficulties of getting the right number of shares on the exact date with a specific stock price. I would not be surprised if custodians discouraged this as it appears to me that IRA departments are just not set up for same day prossessing services. A custodian can imposed more restrictive rules than the IRS allows... they often do, held only in check by competitive market pressures for service. I would be curious if there would be a tenderancy in the internet brokers saying no for cost reasons. You might want to think of the MRD as at annual rebalance the portfolio signal. Sell off a non-performing stock or part of something that has begun to dominate the portfolio. The few MRD portfolios that I have examined seem to cover most of the distribution out of accumulated dividends or MM yield.

You are mixing a couple of issues: portfolio turnover, tax reporting requirements, aggressive investing and mutual fund issues. From a taxation perspective, you do not distinguish between cap gains, dividends or interest in a Roth. In addition, you have no transaction reporting requirements for the IRS in a Roth. You keep records based upon what you personally need to know how your investments are doing, what changes my be called for, and if your progress is "on plan" with your future retirement needs. The above is true regardless of if you are investing directly in stocks or bonds, or using mutual funds. Does you idea make sense? Well, you are right about the Roth is indifferent to transactions. You will not care about the timing of capital gains. Any fund with a lot of turnover is going have high operating expenses which is a major negative. I would choose my investment approach based upon my long term objectives and the need for some balance. If you are young, you have a long time to ride out annual market flucuations. If you were planning to start withdrawing in two years, I would not take such a high risk route that you have suggested. While you did say you were thinking of this route using mutual funds, let me address the issue of individual equities (aka stocks) that other readers might want to pursue. Yes, being a day trader with a Roth is administratively pretty easy.... your recordkeeping is minimal.... but this is absolutely a bad idea. Why? Because fewer than 20% of the short term traders make any money, and if you are reading this message board you are unlikely to be one of the very successful 20%. Been there, done that. While I held my own for a few years I sure saw lots of casualties that were downright ugly. The successful traders act with zero emotion, they don't get excited with their wins.... but the risk/exposure does seem to encourage a lot of Malox. And trading does soak up an imense amount of time. From my personal experience, I will agree with Dirt Harry (Mr Eastwood to most) who has been quoted "a man must know his limitations". The average short term stock trader has disconnected from reality and acts more like someone at the track excited about making a big score with a horse in the next race. Short term trading is not glamorous, it is a day to day grind. Most successful investors have a very long term view of their choices. You don't need to be swinging for a grand slam with every at bat. Collect a bunch of singles and doubles and let time be your friend.

Tim, You can not selectively convert just part of an IRA to obtain benefitial treatment. All IRA assets are blended together. This is even true if the assets are with different custodians. For example, you might have 4 different IRA accounts two at one custodian, and the other two with separate custodians. From the IRS perspective, all conversion mathematics are done as if all the assets were in one big pile at one custodian, and you can not convert just a favorable part. All conversions are done using percentages for the overall pie to figure taxable amounts. I am not an expert on the accounting issues of the 401k side, but I don't believe that your capital losses will have any impact on a conversion since the 401k has already been rolled into an IRA. You need to have an tax/accounting expert look at your very specific facts and layout your options. I agree with your comments about the long term prospects of tech stocks. You portfolio included some very good companies and did not include the very speculative dot.com's. The problem is that you just have too large a percent of your investments in a narrow area. You can also find some great techs in medical devices, pharmacuticals, etc. and it would not hurt to pick up something in media, retail, leasure/entertainment to give your portfolio better balance.

Too bad you co-mingled 401k with IRA money. If you had not, you could have rolled the IRA into a Roth and only pay taxes on the amount over the 8k. Now, the assets are blended and like scrambled egg, you can't separate the yolk and whites any more. I was confused by the math you presented, so I will leave the potential tax bill to Barry and the other accountants at this site. Because your circumstances are complex, you definitely should rely on a local accountant to assist you before you take any further action. I have a much BIGGER issue that should be addressed. You were not really investing with these assets but rolling the dice on a very narrow niche. You have five stocks involving internet/networking switching, storage or hardware: Cisco, Sun, Nortel, MCData and EMC. Oracle provides server/internet software. Kopin focuses on semi conductors and flat screen displays. By any reasonable measure, that is way too many eggs in one tech basket. You probably are painfully aware of the actual (can't use potential here) limitations of this investment approach. I bring this up because there are lots of novice investors that read this message board who may be able to benefit from your example. Beware the narrowly based portfolio! Seven stocks representing seven different industries is just the begining of a diversified portfolio. This portfolio was seven stocks in the essentially the same industry, no bonds, no cash. Retirement investing for most folks should not be making big wagers on a few stocks in one industry. Investors do not need to look for a "grand slam" in every at bat. You can win the big game if you can string together lots of singles and doubles. The average investor will achieve great results if they can get a 10 to 12% annual gain over the long haul (think decades). Sectors with 50% and 100% gains should be viewed with great suspicion. A small play is fine, just don't bet the farm. Inclined to treat Roth/IRAs (the great tax shelter) as a pool of assets for long shot bets? Don't. I don't think anyone is clever enough to pull it off, the stock market just has too many unknown driving forces. If you must gamble, restrict it to Powerball.

This year? If you really mean this year, then you have time to arrange for your qualification. If you find anyway to get a payroll check from anyone, you will jump into qualifying. For example, you provide consulting services to another company, take a temp job on the weekends or during the holidays. UPS pays over $10 per hours during December for temp help. I helped some high school kids to pull over $1,000 and start a Roth last year based upon about 10 days of long hours. They were astonished and now have their first lesson in investing. If you are incorporated, you can pay yourself a small salary such as $2,000 even though you were losing money overall and qualify for an Roth. Talk to your tax advisor, there may be other options for you. Although you may be annoyed about your current circumstances, once you are making money again you get much more favorable treatment than the average Joe pulling a paycheck. There are many mechanisms for structuring a business to allow you to make much larger contributions to your retirement shelter. You were sketchy on the details of your business, post some background info and you may get some additional help at this site. Good luck.

Interest rate options: As you see from the biz headlines, interest rates have been dropping rapidly since January when Greenspan/FED decided the economy was slowing down and dropped various rates. This has in turn lowered all sorts of interest rates. So, part of the problem is that info from more than a year ago is way out of synch with the market. Like most investments, risk is linked to reward. The least risky investment is probably the insured CD at a bank, where the government says they will make you whole even if the bank fails. And... since the CD has so little risk, the bank offers the pawltry interest rates that you noted. {Note, you still have the long term risk of inflation eroding the value of your assets, but that is another story. You just have near zero risk of loss on principal.} There are interest bearing assets outside of CDs that offer higher returns but come with increasing risk. For example, mortgage backed securities are generally more than a point higher. Corporations also float bonds that must offer a higher yield than the bank CDs to be viable. Low rated or junk bonds offer still higher yield because of their perceived risk. One way to reduce some of risk of bonds is to use the mutual fund approach, so you reduce the risk of a few bad apples. Generally, there are not many sound investment options that will offer more than 8% right now. You did not say much about your age or investing experience. I have a question for you... why are you focused on "interest" yielding investments? Over the long haul, you are better off investing in equities (aka stocks) which have averaged in the 10 to 12% annual appreciation. Stocks are currently "on sale", that is most prices are way off their highs. If you have more than a decade of retirement investing, you should be looking to stocks not interest bearing assets IMO. I am not a big fan of Suze Orman. She tends to tell just part of the story and has some odd ideas. Too much hype and cliches.

I agree with Pax's comments above but want to expand: "Guarentee" ussually refers to guarentee against loss of principal. For example, in the US almost all bank accounts are guarenteed against loss of principal. Exceptions include extremely large deposits or assets in bank offered non-guarenteed investments like mutual funds. A second meaning of "guarentee" is that the rate of return is fixed, which may be the case for certificates of deposit (CDs) which are generally offered by banks. So, if you have a modest amount of money in a fixed CD at a bank, you probably can calculate to the penny how much you will have at the end of the CD term. But... you give up a lot of return when you want a risk free investment. Bank CDs are in the 4% annual rate of return right now. Let's look at some of the non-guarenteed investment alternatives: BONDS: offered by the federal government, states, municipalities, special authorities (like airports) and corporations. A bond is an IOU. You get interest and your initial principal at the end of the term. Bonds are either backed by taxing authority or based upon expected revenues/profits (like MSFT earnings or tolls on a bridge). Bonds are not guarenteed, their "safety" is directly related to who issued the bond. A Dot.com bond is next to worthless, while Federal paper is backed up by the taxation power of Congress. STOCKS: never guarenteed. You are buying the future in a successful capitalist economy. Bond holders get paid first, equity holders (shareholders) come second... or third if there is a preferred class of stock. Companies can issue dividends, but dividends are at the discretion of the Board of Directors. Example, Florida Power and Light in the 1990s decided to cut their dividend to keep earnings for growth. Over the long haul, stocks go up about 10% a year. Good years out number bad years from 6:1 to 8:1 and good years are generally many percent better than the stinkers (like 2000 and 2001). MUTUAL FUNDS: only guarenteed to the extent they are purchasing CDs or equivalent product. Risk is directly related to the underlying investments.... bonds, stocks, cash, etc. Lots of folks have seen their assets shrink in the last two years as part of a market pullback. Big shrinkage if you where invested in telecom or internet stocks or NAZDAQ tech stocks. But, if you were heavily weighted toward thrifts/banking or energy you might be up a little. Are interest rates related to economic vitality? Yep. When the economy slows down, governments want to cut interest rates to stimulate business activity. When the economy is over-heating with very high growth, governments often will raise interest rates to cool things down, making rapid growth more expensive. Every article about Alan Greenspan and the Fed is centered on the interaction between the economy and interest rates. A smart investor does not panic or get upset by the month to month swings. The really clever folks use downturns in the stock market to pick up "bargains" in the hope that 12 months later they are winners. Contrary to some of the media hype in the last five years, investing is measure in years and decades.

To extend Pax's comment, you can always rollover to custodian #1 and then sometime later this year switch to custodian #2. As long as the switch is done directly from custodian to custodian, you have no problem. IMO you never want to receive a check directly from anyone, let the custodian process the paperwork. It seems like you may be new to the investing world. The folks who comment on this web site can help you further if you provide some basic info such as: your age, marital status, rough income level, rough size of the 401k assets on which you are trying to make a decision, investment experience (type of investments, years, academic training), marginal tax bracket, etc.

- They pay the $40.00 exiting fee. Exit fee from the 401k? The amount is too small to be an issue. Service, investment options, 24/7 availability, readability of statements, investment research tools, research reports would all seem more important to me. If you plan to use their web capabilities, check it out first. If phone calls are your method of access, try calling at different times of the day and clock the response time. - No annual/custodial fee for balances of $5,000 and more. You have lots of options with either no annual or waived fee with 5k assets... the competitive environment for brokerages has driven the marketplace in this direction. /COLOR] - They have the mutual funds I want such as Vanguard Index 500, Janus Worldwide (if I transfer all of my 401k balance into the fund before the 401k is rolled over), Fidelity Growth & Income, etc. Remember, you only can buy shares in a fund that is actually OPEN. Janus Worldwide is not right now. Access probably varies by brokerage and mutual fund family. Low expense funds just don't want to pay the brokerage freight for processing the transaction, especially if their size is small. A fund has little control over assets if they are in an outside brokerage. Schwab, Etrade, etc. give you access to thousands of funds... under various rules. You don't want to get married to a specific fund as the winners from the past year, quarter or decade often fall below average in the subsequent period. - They are a discount brokerage. Discount? This covers a wide range, you need to measure real costs for your typical trades. Costs can range from $5 at Brown to hundreds at Schwab if the number of shares goes over 1,000. It used to be that commissions were correlated with brokerage advice and services, but now the differences lie on the continum of computer/efficiency vs human/personal contact. Do you focus on mutual funds or stocks? If stocks, do you buy more than 1,000 shares or odd lots? An active trader will ussually find more money lost or made on the nuances of executions rather than commissions. Commission costs count less for the long term buy and hold investor. - Transaction fees are 0.65% of the principal amount. You need to ask more about this. Percent of what? How often? What funds are exempt? If this is the charge for each mutual fund, then look elsewhere. A couple of final points: most financial mags have articles comparing brokerages on response time, investment options, fees, etc. If you don't like the brokerage you select now, you can do a direct fund transfer at a later date to another custodian. I have no direct experience with CIGNA, sorry.

You have two problems with your plan. JAWWX and JANSX are both closed to new investors. You can only add $$ or start a new account if you can demonstrate you currently have assets in these funds at Janus. Schwab covers three of your picks (problem above was noted at Schwab web site) and you can readily substitute the Schwab 1000 for Vanguard 500. While Vanguard is just a hair lower on expenses, but note Schwab cuts the gap in half if your investment is greater than 50k. Brokerages differ a little on what funds they will let you buy without charge. Charges to buy other funds range from inconsequential to just plain too high. Ask you custodian to explain. Call Janus directly if you absolutely are fixed on investing in any of their funds. They can tell you which are open, and which brokerages have a relationship with them. Since there are over 8,000 mutual funds, I would recommend that you spend your effort picking the new custodian and worry about your investment choices later. Etrade, Ameritrade, Schwab, etc. can hook you up to more mutual funds then you could ever review.

1. While paying off a credit card debt using savings account is ussually a smart thing.... you posed a different problem. Today mortgage rates are extremely low and generally are deductable. Normally most folks have their IRA assets in stocks, mutual funds, bonds or some combination of these and therefore expect much higher returns over the long haul then a savings account. For example, the long run annual return for stocks is in the 10-12% depending upon the mix of stocks and the historical time period you use. Bonds generally are in the 6-10% range depending upon the type (federal, state, muni, revenue, corporate, etc.). 2. Raiding your IRA is often a very bad idea over the long haul because you destroy the tax shelter before you get the full benefit of decades of tax free compounding. 3. Folks will give you examples of large total amounts of interest that is "saved" by paying down a mortage. Many of these examples are misleading because they fail to show any other scenario which would put the plusses and minusses in perspective. Mortages are essentially the cheapest money to which the average homeowner has access. Home equity, car loans, credit cards, etc. generally have much higher interest rates. Right now mortgage money is essentially "ON SALE". Don't you ussually buy of things on sales? I agree with the prior comment that you should talk to a financial advisor: to get an informed answer on what you can and can not do with IRAS, and to give you some perspective on you personal finances. If you want more advice here.... please specify your age, marital status, approx income or tax rate, and what kinds of investments you are actually making in your IRA.

No taxes on Roth transactions. No taxes on normal retirement withdrawals either. Keep track of your Roth investments for your own purposes as there is no transaction records that the IRS will need either.

While you do not need to keep track of transactions for taxation purposes, you should have some rudimentary system for keeping track of your investment decisions to understand your results. For example, you might want to keep a simple log of purchase date, shares and total amount and the same info at time of sale. This way you can have a general idea of your annual return. I also recommend that you always know the percent allocation to each investment or investment class (bonds vs cash vs equities). It is not uncommon for someone to have 8 investments but for two to account for 80% of the assets. If you are visually oriented then a pie diagram will be helpful. This advice holds for both stocks and mutual funds. Failure to keep track of your investments is a primary factor in poor results. I am amazed at the number of people who don't read their monthly/quarterly statements or file them away in a three ring binder. Don't rely on your custodian to do your job. Conclusion: focus on your needs for records, this is not an IRS issue