John G

Like any rule of thumb... simplicity may not necessarily produce a good fit for your circumstances. You need to temper "rules" based upon your circumstances. The concept assumes that as you get older you want to be more defensive and hold more cash/bonds. Some folks do, some don't. Let me give you 5 exceptions: 1) You have a huge pension plan and great medical benefits (such as any executive, Senator or ex-President) you probably will not be drawing down as heavily upon your retirement assets...so you want a higher percent in equities because they will be invested for a longer period, perhaps for your heirs. Upon death, assets currently get a stepped up basis. If you sell them to buy bonds, you probably will be paying capital gain taxes. 2) You are especially good at picking stocks (I have a friend who runs a hedge fund that falls into this catagory) and it would be foolish to walk away from great investments to own bonds. Some folks investment performance drops when they diversify! Some folks seek to enhance performance by using margin! (generally non-retirement accounts) 3) Your assets are supersized and you don't expect to consume all of your nest egg. Would you advise Bill or Warren that they should own more bonds when they will never spend all of their assets? That's an extreme example, but I advise some folks with 10+ million in assets and its pretty clear they are not going to spend even half of that. If you have amassed a networth of 10 million, you are likely invested in equities, real estate, bonds etc. that might allow you to spend 1/2 million a year. If you only expect to draw $150,000 a year, you have a huge cushion. 4) Your family medical history suggests that you will live a very long time, or perhaps your spouse is much younger than you and is expected to live a long time. The longer your expect to live, the more you want to have in equities (aka stocks) which should outpace inflation. Ditto anyone retiring earlier. 5) You started late in accumulating for retirement and you want to maintain a high equity percent as part of a plan to boost returns. Folks get the mistaken impression that they need lots of cash the day they retire. You don't. And, lots of folks live 30, 40 or more years after they retire. Don't focus on the "rule". Do understand the underlying theory and figure what might work best for you. I know dozens of successful people with over a million in net worth. They tend to be heavily invested in a diverse mix of equities. Many of these folks make their own stock picks. Some rely on ETFs or mutual funds. Most of this group has a high percent of their assets in equities. No one seems to have noted that you said your assets were in a "Target" fund. Basically this is a marketing gimic created by the mutual fund industry to sell consumers on the idea of simplification and automation. Target funds supposedly adjust automatically as you age and approach retirement. Better than sliced bread ~ if you are the average person with a standard retirement date and actuarial life expectancy. What if you are retiring later, have more or less assets, specific health/longevity, a special spouse circumstance, etc. Its sort of a mantra with me - - its your job to figure out what works best for you! Folks who farm out this responsibility to others often run into trouble. Spend some time reading about financial planning. Think about how you might be different from the average.

I believe a few custodians require a sign off - mainly to protect the custodian, not you. I think you should consider this an area of emerging law. I would not assume that the answer you find for your location could very easily change in future years. Reminder: do specify secondary beneficiaries! If the primary beneficiaries die before you, you want to be sure that your wishes are known. Also, this allows the primary beneficiary a choice to decline all or part of the assets. Example: my wife is the primary beneficiary on both my Roth and IRA. My daughters are secondary. If I die before my wife, she can take the assets or decline all or part, and the residual will be divided among my daughters. Its sort of a basic estate planing toggle.

No, you can not. Contributions to an IRA or Roth must be made in cash. The only transfers in kind that you can make are when you do a Roth conversion, which according to your post does not apply to your situation.

Here is some feedback on AROIX. This is a "target" style fund. Yes, its NO LOAD. Yes, it has 0.20% annual expense rate which is low. Two good points. But, you should also understand that it is currently a large cap growth fund. So it will focus mostly on very large companies that are growing faster than industry averages...like Google, Intel, etc. Nothing wrong with that, you get some diversification in that the fund holds many stocks, but note that you don't have small and mid size company represented in the portfolio and they shy away from the "value" style, or special situation investing. Currently, about 7% is in cash, and 11% in bonds (these components will increase later) so you are not 100% invested in the stock market. I did not see a breakdown on domestic vs international. All of the above are diagnostic in nature, they don't say that AROIX is good or bad. (no one can tell you if any single fund will out perform the "pack" in the future... that includes me) What is a "target" fund? Basically its a marketing gimic, a new concept that the mutual fund industry invented to sell to beginners like your self, or mid-life folks who just find investing too confusing. Over time, the AROIX will migrate from the fund you see now to a fund more heavily based upon bonds and income producing funds. "Automatic" seems to work for a lot of folks and money is moving towards target funds. Simple sells. Lots of mutual fund families have created these in the past five years. But remember, your long term interests may not coincide with the changes that will be made in this fund. So, at some point you may want to make other choices. This fund is just fine for you. But, I think that as you learn more about investing, you will want to consider other options. Don't buy into the "auto pilot investing" that the industry pitches with target funds. You need to think about what you are doing....but that can wait until you finish college. Best of luck. Post again if you have questions.

You can get started without knowing a huge amount about investing. Lets keep it simple: (1) find a custodian (Etrade, Schwab, Fidelity, or any of the mutual fund families, etc.) that will allow you to open a Roth at your age. (2) make a full or partial contribution to get started (you "dollar cost average" if you set up a monthly program of automatic contributions), (3) narrow you choices to a single NO LOAD mutual fund with expenses below the industry average. Such a fund can be an index fund or any broad themed fund. Read your montly statements to confirm all of the above got done. Then.....forget about your Roth and focus on your education. Do an annual review - make the decisions about contributions for the new year, perhaps consider a second fund at some point. Time is the number 1 friend of an investor. Don't spend a lot of time trying for perfection - you won't find it. Do spend some time learning more -- via your classes and watching your mutual fund choice. Becoming knowledgable about investing takes decades, not weeks. I have a suggestion for 2 hours a month of outside reading: Kiplinger's Financial magazine. It covers investing basics, mutual funds, stocks, credit, home ownership plus a few articles about technology/cars that you might want to buy down the road. Annual subscription is about $15. Besides the beginner materials almost all mutual funds and brokerages produce, you will find interesting material on the web and at any local library. Perhaps you might want to start an investing club at your college. Also, some universities (I know Harvard, Yale, Penn, and Penn State do this) have business students run an investment portfolio...learning to research companies and evaluate financial data. Ask your professors about this. If they don't have a program like this, march down the dean's office and suggest it. Students who initiate or lead programs are highly prized upon graduation. You learn a lot more in experential education activities.

Since all assets are taxed at their full value, there is not much point in taking "in-kind". There is no long term capital gains treatment on IRA assets that are removed. Note, you could readily take cash and purchase the assets outside the account. In this era of very low commissions, the transaction cost is negligible.

I understand you answer. I was thinking about what would happen if you could withdraw a contribution for a year and then later in the year, redeposit that contribution. Seems like to different rules might apply. As I am not a tax accountant or lawyer, I thought it was worth posing a option that I have never seen discussed here.

Appleby question: If part of the $15,000 was a 2008 contribution, can they add it back any time before April 15, 2008 or is that also limited to 60 days? Observation: In an era of cheap money, "money on sale", you have many options for meeting a short term emergency...home equity loan, credit cards, signature line, family loan, employer advance, etc. You should consider all of these options before trying to swing a 60 day "loan" from your Roth.

Clarification: Masteff is right - if your married you both qualify via your combined income. It was not clear from your post if you had a partial year (qualified then) but won't qualify in the future...or you don't qualify at all. If the later is true, then you need to contract your custodian and withdraw the ineligible contributions. You may be able to re-establish the account as a regular IRA. Alternatively, you can start a general program of investing. For the moment, long term capital gains and dividends are taxed at low rates. Do not assume that the 2010 wide open option will stand. We have a few elections coming up and a new Congress and President will probably make economic/tax changes. There is not logical reason for Roths (and inheritance taxes) to jump back and forth depending upon the calendar year.

There is another potential benefit associated with beneficiary designations - stemming from the two tiered structure. Example: Each spouse names the other as the primary beneficiary on their IRA and Roths. They name other heris as secondary beneficiaries. When the first spouse dies, the surviving spouse can elect to receive the assets of the account and continuing the IRA or Roth tax treatment as if it is there own. But, if they do not feel they need those assets, the can decline (completely or partially) to be a beneficiary and the assets will pass based upon the secondary designation. This reduces the surviving spouses estate. The secondary beneficiaries get the continuing benefit of the IRA or Roth as the funds are dispersed. Like A/B trusts, the two step beneficiary designation may be a useful tool in estate management.

Contributions to a Roth can always be withdrawn, at any time, for any purpose. Some reasons to consider a Roth: <> The Roth could be in your name. His earned income can enable you to have a Roth. <> No set timetable or mandatory amounts that must be withdrawn. <> Roth may be put into a custodial account with different investment options. (probably not the case for you, but could be a factor for someone with narrow choices of investments in their primary retirement account) Warning: Yes, you can contribute to a Roth in retirement, but for most people, retirement means the end of earned income. Interest, dividends, capital gains, etc. are not "earned income". Without earned income you can not make contributions to your Roth. However, if you or your husband has any kind of income in retirement (eg. part time job)... then Roth on. Caution: If you expect to be in the same tax brackets now and in retirement, then Roth vs IRA vs SEP IRA should be nearly a wash. Some calculators are too simplistic to cover the subtle differences of taxation. Some factors that might tilt you one way or the other: your expectations of future tax law changes, state income tax status now and where you may retire, change in IRA/Roth laws, etc. You will find it extremely difficult to accurately predict how all of these will play out over 10 years, but ultimately you make some assumptions and make a choice.

Caveats: 1. Be sure that you understand the qualifications for contributing to a Roth - - earned income, tax filing status, max income level - - see IRS Publication 590. For example, if you are currently retired, you may not have the earned income to allow a contribution to either a Roth or IRA. 2. I'm not sure why anyone would start a Roth now and then take funds out in less than a year. That defeats the whole purpose of a tax shelter....time for your investments to grow. Are you just posing a hypothetical or planning a fast withdrawal? If the later, I'm not sure it is worth the bother to set up the Roth. Withdrawals Yes, you can withdraw ROTH contributions at any time, for any purpose, without penalty or tax. Since you are over the age of 59 1/2, you can withdraw earnings at any time. 5 Year Issue I think you may have picked this up from IRA to Roth conversions, which does not appear to be what you are talking about. The 5 year rule only applies to conversions. You appear to be talking about contributions to a Roth. MMngs comment The Mmng comment is misleading/confusing. You can only withdraw from Roths without penalty before age 59 1/2. Early withdrawals for an IRA are both penalized and taxed. Taxes only apply to regular IRAs withdrawals and depend are effected by the previous deductible/non-deductible components...a complication that does not apply if you are just talking about Roths. Post again if you have questions.

Let me add three things: <> You can do partial conversions each year to keep from having bracket creep, as long as you meet the general requirements in each year for a conversion. <> Roths do not have mandatory distribution schedules - which may be one of the reasons you are considering a conversion. But, depending upon your age, you may have a distribution that needs to be satisfied before you can roll over all/part of the IRA. (I'm not accountant, but I remember this issue came up previously.) <> Do check your benefitiary designations and if you do a conversion, make sure that your benefitiaries are correct in the new account!

You don't mention your age, income, state or the amount you were thinking of converting. You might want to add another post and let folks comment. If you are talking about a sizeable conversion, you definitely want to run the idea past your accountant or tax advisor. A few dollars spent on advice might keep you from making a major mistake. There are many "tools" like this on the web and at specific brokerages and mutual fund families. Cautions: 1) Some of these calculators fail to include the "opportunity cost" related to the potential growth in assets that are used to pay the taxes. If your tax rates now and in the future are close, then IRA to Roth conversion is more likely to be a wash. 2) Some calculators fail to incorporate income tax in state of residence differences. Example, convert in NY or California, but later take distributions in Texas or Florida which do not currently have state income taxes. Converting in an income tax state, then retiring in a zero income tax state is generally not attractive. My background is corporate planning and consulting, which includes predicting/forecasting/modeling the future. Many decades of experience has taught me that your risk of uncertainty and "surprises" goes up tremendously over time. For example, me miss on 50% of the events that happen in the next five years, and perhaps 80% of the events fifteen years out. This is sort of a perverse "half-life" of predictions. You can observe this in your own life. Go back 5 years, then 10 years. Think about what happened over time that you did not predict: births, deaths in family, relocations, promotions, divorce/marriages, illnesses or injury, inheritances, etc. How does this apply to your question? Well, think about the uncertainty regarding just two things -- (1) income tax brackets/rates and (2) inheritance taxes. Congress likes to change these. Lots of folks assume that their tax rates will go down in retirement because SS/pensions. But, you might have fewer deductions (no mortgage interest if the house paid off) and if you are successful, your dividends, interest and capital gains may keep you in a higher bracket. At some point, taxes may be increased to pay the expanding bills for Iraq, veterans benefits, healthcare, etc. My observations are that well educated, successful people tend to under estimate their asset growth by a long shot. They tend to think of linear growth, while investing is often expodential or compound growth.

You can take contributions (not earnings) out of a Roth at any time, at any age, without penalty. You can request withdrawals once you reach 59 1/2 of both contributions and earnings. Also, note that there are no MANDATORY distribution schedules with a Roth, which may allow you more flexibility than with a standard IRA. Because you are age 64, you get the bump up in max contributions related to the "catch up provisions". Post again if you have questions.

Better? Worse? I think the better answer is they are different. You control your IRA/Roth and often have more choices of investments. 401Ks have features IRA/Roths do not - and you may have a company matching program which boosts immediate returns. The tax treatment differs. Contributions from Roths can always come out without penalty. Distributions from Roths in retirement are tax free. There is not set schedule for Roth distributions - no minimum age or mandatory rate of dispursement. Max contributions do vary as well as Janet pointed out. There are many retirement options besides 401k, IRA and Roth. College student status is generally not a factor in retirement options. Participation is generally a function of employement, earned income, max income thresholds, and tax filing status. Perhaps you should tell us a little more about your self....employment, married/single, age, graduation date, experience in investing, goals, etc. Then I will try and narrow the choices and give you some details on how to get started.

I am surprised you want to move the funds from Fidelity. They have a huge array of investment choices. Don' t be too concerned about 4K dropping to 3K - you can get short term variations like this. Banks tend to have a lot of very conservative investment choices and often these carry higher fees, annual expenses or loads. I say "tend" because banks are used to pitching the "guarenteed" CD. You are investing for decades and should be heavily leaning towards equities (aka stocks). Read the fine print or your bank offerings. You can leave the Fidelity stuff in place and open a second set of Roths at your bank.... although you might have low balance fees and certainly more stuff to track. There is no reason to close your existing Fidelity account and pay a 10% penalty. If you went that route, you would never get to redeposit those funds. You can do a custodian to custodian transfer. The new custodian will handle the paperwork. Fidelity will charge you an account closing fee, which the new custodian may or may not reimburse. (you need to ask for reimbursement) You can not "top off" your prior investment to get you back to 4,000. Again, I am not sure you made a very convincing case for moving the money out of Fidelity. Your decline in value is due to a combination of the choices you made and the short term market flucuations. You could have just as easily seen a decline in the investments at any other custodian. If anyone is suggesting that you can avoid losing money in an investment, they are either blowing smoke in your eyes or recommnending something way to conservative for a 20 something.

You can do a custodian to custodian transfer at anytime. You can elect to transfer all or just part of your account. You can elect to transfer assets (stocks, bonds, mutual fund shares) or selective assets or all/some transfered as cash. Many custodians charge an exit fee. Some brokerages/fund families will refund these fees if you ask. Generally the exit fees are not deposited in your Roth as this would be a contribution. You may be able to pay exit fees by check to avoid a reduction in your Roth, but I have never known anyone that tried this. I am curious as to why so many folks are switching custodians. You surely don't have to do this if you move. You are allowed to have more than one IRA or Roth account. Frankly, in my experience, the customer service and "error" rates at most of brokers and fund families is about the same and that over time the number of investment choices vastly exceeds what most folks need to consider.

Jevd - how true, how true. I am in Florida right now and reviewing various documents my mother and father had prepared in 1999 and revised in 2005. So far I have found two outright mistakes plus two paragraphs that can be read different ways and are ambigious as to how the math should be applied. And, don't get me started on the two annuities that are not flexible and don't work well with the current situation. My folks are locked in to a 3% return and if the best way to change that is to take the funds out quickly which triggers a tax rate bump. (Rant off) I would recommend that everyone who is married, has kids, or is over the age of 30 spend one hour each year to review their designations of beneficiaries on insurance policies, pension plans, 401ks, IRAs and Roths. Not a bad to time also check that all deposits were done correctly, contribution years were correct and that investments are meeting your goals.

Your custodian may also have a copy of form 590. Some have the data online to aid retirees. If they have not been taking funds out of their IRAs, you may have a problem because they are both beyond age 70. If so, post again and the accountants that respond to questions will give you some tips of how the get back on track with the IRS.

All of the above. Plus, besides the likely default to spouse, you may find other IRA/Roths where a beneficiary was listed. You make no mention of if this was a recent marriage or if there were prior spouses. If this person was married more than once, it will be harder to establish a clear claim. I find it interesting that this account was overlooked when the estate was handled. It has me wondering if there are any other assets in NY that were missed. You can use websites in each state to search for unclaimed accounts via SSN and name. You may need to do this now, then again after a few years pass since not every account will have been closed due to inactivity so soon. ALERT to all readers: Do you know the designated primary benficiaries of your accounts? How about the secondary beneficiaries? If you have transfered any IRA/Roths or switched jobs (pensions, 401Ks), do not assume that the records have been maintained. Ditto if your broker or bank was acquired by another firm. Take a few minutes and confirm you beneficiary designations.

You have just outlined one of the common approaches to funding a Roth. Yes, this is a monthly version of dollar cost averaging. Yes, you initially need only one broadly based mutual fund (avoid sector specific, single country or any narrowly cast fund that has limited diversification). This commits you to a plan for the future. You should review your progress perhaps twice a year. After a few years, you may want to consider a second mutual fund. I would suggest NO LOAD versions that have below average annual expenses and some reasonable track record. You do not want to chase last years hot fund - something that rarely works. You may improve your results by funding your Roth at the begining of the year. This means that more money is tax sheltered for a longer period. Some folks fully fund in early January of each year. This is still a version of dollar cost averaging - but on an annual basis. Both approaches work just fine over the long haul. Note: you did not indicate your career stage, investment knowledge, current retirement assets, employee based plans, spousal plans, years to retirement, retirement goals, income tax rate, etc. So, please treat the above as very general advice. If you feel that your circumstances are very unusual, you should post again.

You can redeposit all the funds if 60 days have not elapsed. You can make contributions now if you are eligible for 2008. An interesting question for our message board accountants - - can you contribute again for 2007 since the window for contributions is still open if you originally funded 2007 and then withdrew the funds? I don't know the answer to that possibility. FYI to others contemplating withdrawals from a Roth: Think twice. A Roth is your personal tax shelter and it doesn't work if the funds are not left inside to compound. With so many sources of inexpensive capital (mulla) - home equity loans, signature lines of credit, internal family loans, home refinancing, initial zero cost credit cards, etc. - think about your other options before tapping the Roth. It is often a better idea to seek other sources, or perhaps defer the expense (or pay it over time) rather than tapping the Roth.

1. Yes for 2007 if you have sufficient earned income and file a joint return. 2. Yes, for contributions. Earnings or gains are different. 3. Yes 4. No joint IRA/Roths. The "I" stands for individual. Each spouse would have their own separate account. 5. I don't know how long it takes to remove contributions, but I would imagine it takes a letter to the custodian an is probably not a 48 hour deal. Perhaps you should consider partially funding your accounts at say 2000 each, then moving a little more over later in the year as a 2008 contribution. While you have credit cards, signature lines of credit, home equity and other possible short term sources of money, I would not recommend that you every empty the piggy bank. You don't indicate your age, income or other family circumstances, so you have left an incomplete record for giving advice. 4. Yes, you can do both. Generally, you want to contribute enough to the 401k to collect any company sponsored match. Post again if you have other questions.

All good points.... While custodian to custodian transfers are easy and almost automatic, the tax payer needs to pay attention to monthly statements to ensure that the transaction was done correctly....on time, the right amounts, posted to the correct year, etc.