John G

Pax, I agree with all you said. Thanks for adding some more things to consider. Savings for buying a house, college for kids and a cushion for what my mother called "a rainy day" are all sensible. The max amount this couple can currently tuck away in a Roth is $4K (2k each) and given their income, hopefully they can do that and more. A general target for a young couple would be investing (Roth or otherwise) atleast 10% of their income. That might be hard for some and easy for others. It surely gets a lot harder 10 years later when you are buying school clothes and thinking of Disneyland. One way to make investing a habit is to make it a monthly expense like the phone bill, which also means they would be dollar cost averaging. PS: Marriage takes as much work as you job or investing. My best wishes too. Kathy and I are 20+ years of marriage and perhaps the most important thing is to be able to grow and mature beyond those wonderful early years. [Edited by John G on 08-30-2000 at 01:32 AM]

Relax. Everything in life has risks... driving a car, working, playing golf (lightning!, getting hit by a ball), not studying hard (added in case my daughter is reading this!), using appliances, getting a suntan, etc. As an adult, you need to understand your risks and respond. Same with investments. All types of investments have some level of risk. Even doing nothing with your money involves risk. For example, if you bury your money in the yard you run the risk that it rots away, your neighbor digs it up, you forget where it is, and most important of all you lose ground every year to inflation. Erosion of value from inflation is the fundamental reason why we are compelled to do something with our money. Lets look at Bank CD risk. They are ussually insured against bank failure. The risk is therefore less an issue of loss than that your return does not exceed inflation. The yield on a CD is ussually fixed and the term ussually fixed so you know in advance what you will finally receive. You have an "opportunity cost" when compared with a different investment with a better return, such as a corporate bond or stock. You make the choice based upon your perception of risk. Are you concerned that the economy and stock market will go kaput (a technical term) or concerned that your investment will not grow suffiently for your later needs.... in this case retirement. Lets look at stocks. If you own just one, then the obvious risk is that you could make a bad pick such as a company that performs poorly. But if you own a diverse group of stocks such as through a mutual fund, your primary risk is the market is weak during your holding period. Historically, the longer you hold an investment, the lower this risk becomes. For example, over the last 70 or so years there has not been a single 20 year period (N=50 observations) where the market has ended lower. The average annual return has been in the 11-13% range for equities. But in 40 years, you are sure to have a bad year with a negative 20 to 40%. And the best years maybe you have a 40 to 60% gain. Fortunately, the good years have outnumber the bad years by more than 5 to 1. Why this is true is complicated but I guess the simple answer is that in the long run our economy has grown. No guarentees in any one year. Equities are a pretty reasonable choice for the long term. And no one can tell you for sure which are the good years to come and which will be down! No one. So don't ask me or anyone else. If you are young and a long term investor, you should have no fear of equities (aka stocks). Since you are 23, you may be investing for more than 4 decades. Probably more like 6 decades since you don't stop investing the day you retire either. When you understand investing, you will better accept the idea that you sometimes will have a bad year. The bank was asking you how much risk do you want to take. It is a prudent question for them to ask. They are trying to find out what kind of investor you are. For example, the internet IPO investors are more like folks who go to the track and bet all day on long shots. A cautious investor spreads out his stock choices such as through a mutual fund or a modest portfolio of individual companies. That reduces the risk. This later type of investor is like the old Notre Dame football teams, grind it out on the ground each down for four yards and you will move down the field. An investor scores TDs when they invest for the long term and make reasonable choices amongs stocks and bonds. You need to become more educated about IRAs and investing. Read Kiplinger Financial or Money mags. Besides banks, call some brokerages such as Schwab, Etrade, Fidelity and ask them for their IRA start kit. Let them know you are a novice. They have info to help. You can find phone numbers in the mags and on the internet. Get started and treat the first few years as the big experiment. Don't worry so much about your return, but rather focus on what you will learn. Suscribe to a couple of the above mags. Read 1-2 hrs a month and you will be on your way. Want to decrease you stock market risk further? Then put your funds in the broadest and lowest cost mutual funds, an S&P500 index fund or Wilshire 5000 fund. Choose a no-load fund (no commissions) with someone like Vanguard (a mutual fund company). You then indirectly "own" 500 or 5000 different companies. That gives you "diversity" which means a spreading out of risk amongst many investments. Good luck. Got more Qs? Post again or email me. [Edited by John G on 08-30-2000 at 01:43 AM]

Insurance follow up: "Final illness" is a pretty low probability for a couple in their 20s, and with both working with the income mentioned it is likely that atleast one has work based medical coverage. "Final expenses" this means getting buried or cremated... are we so sensitive that we can't just say that? It is an expense, but unless a family opts for the full package it does not need to be a "major expense". Less than 10K for a modest burial and well under half that for a cremation. "Replace lost income" - when both are working, a single death means the survivor goes back to being single living on their salary. Living on one salary when you are 20 is what about half the country does right now so lets not exagerate the burden. These are typical emotional arguements for insurance that are part of the sales pitch every agent practices. Yes, there is a modest amount of truth imbedded here. BUT, they vastly overstate the average childless couples needs for insurance. If this couple has even a modest amount of salary based insurance at work, they are probably amply covered. The major need for insurance comes as they start raising a family and one member stops working. Then the combination of extra cost and reliance on a single salary clearly makes a difference. But, even here you hardly need to pay off the entire morgage to be able to survive. As someone who has held various insurance policies over the past two decades, I hardly have an aversion to insurance. My advice was targeted to this specific audience: a soon to wed couple in their 20s with no kids.

Viatical: from the Latin "Viaticum" (vi-at'-i-kum), historically, an allowance for traveling expenses or provisions for a journey.) n. The proceeds from the sale of a life insurance policy to a third party by a terminally ill individual. {recently often an AIDS or cancer related issue} I discovered the following statement at one Viatical sit: Insured Living Settlements can be used for both non-qualified (cash) and qualified investment accounts such as, I.R.A.'s, 403b's*, Keogh*, Defined Benefit Plans*, and 401k's*. [summitviatical.com] However, the association web page does not seem to mention plan involvement. See http://www.viatical.org/ Economic theory suggests that you should get only a risk based reward for viatical arrangements. The primary risk issue is how long before the patient dies. Given the high overhead and complication of this investment, I don't think there is much going for it. If it was that great, the insurance companies would want to be first in line. Don't expect any wopping big returns. And, this industry has historically been right up there with aluminum siding salesmen with misrepresentation and fraud.

The general theme here seems to be that participants are bad investors or perhaps too conservative. I have a different take. In my experience, lots of companies do a very poor job in explaining their plans and investment options. Often these explainations are made by people in HR that hardly understand investing themselves. Too much jargon. Not enough examples. Not enough small group or 1:1 discussions. Have you noticed how employees will duck specific questions because they do not want to disclose their circumstances or do not want to appear stupid? Gang meetings that cover everyone from secretary to senior managers just can't work. And then you still have gobs of companies that force very narrow choices upon their employees, or bias things towards company stock. Shame on them. I try very hard to convert what I know about investing into everyday language. It is not easy, but it is also not impossible. I teach basic investing to average high school kids in 3 hours. I suggest that most companies just give lip service to the idea of educating their staff. I have been in some of these meetings and they are pretty weak.

"You can't rollover the shares bought with the after-tax contributions but any such shares always qualify for the special capital gain treatment." Are you talking about rollover to an IRA or do you also include rollover to another company plan? Are there more options if Mountainman starts a company and creates a plan into which he deposits his 401K.

Direct custodial transfer: You initiate this by starting with the destination broker, filling out their IRA forms and particularly the section on transfers. Often they will ask for a copy of the last monthly statement from the prior brokerage. The primary reasons you do a direct transfer is to avoid the tax withholding (US Sam assumes you are cashing out and keeping the money) and avoids the 60 day maximum rollover period. 8% back end load: If these funds are in a decently performing fund you may want to leave them there. Remember, you may also pay and account closure fee in addition to the back end load. Investment club: could be good for you, but beware of clubs that are focus on social rather than financial issues. You will know in 4 months if the club is working or not. Differences in decision dynamics and time commitments ussualy means you need lots of patience. Other decent sources on info: mags = Worth, Kiplinger Finance, Money also books by Peter Lynch. Online = motley fool, street.com TV = nightly biz report, Rukeyser both on PBS. Avoid like the plaque the message boards. 90+% junk and hype

Deductions can not help you qualify for a Roth conversion because modified AGI is used for the determination. You are basically dealing with page one or the Federal 1040, so just a small number of items (such as up to $3000 in capital losses, and schedule C business losses) can pull down your income. You may want to look into a signature line of credit based upon the high salary. This would give you some flexibility. Second, you may also want to speak to the "premier" or "private" banking department in a major bank which could discuss with you various bridge loan options. Third, the job market is very tight right now and some companies may offer a signing bonus, mortgage guarentee, advance or other support to help you solve the problem. It doesn't hurt to ask. Fourth, if the home equity in your current home is significant you could borrow on the current house. Fifth, survey your relatives for possible "internal" financing... those CDs just don't provide much of a return for seniors. Sixth, talk to real estate agents about various options to delay settlement on the new house including "option to buy" or "rent to buy". Seventh, buy the new house with owner financing so you do not have institutional hurtles of loan ratios. Many of the above techniques would not work for someone with an average salary. But, assuming you are not looking at houses above 1/2 million, the six figure salary you described gives you some flexibility. Some of the above may not work with your numbers and clearly in this marketplace you may find limited opportunities for items like 6 and 7. I gave you a lot of options to stimulate your creativity. Taping the IRA is not a good idea. But here is a thought, you could pull the IRA funds and use the 60 day grace period. The IRA funds would then be used to make the down payment on the new house. Before the 60 days elapse, you use some line of credit option to borrow enough to complete the IRA rollover. That loan then gets repaid when you sell your current house. Complicated, yes. Timing issues too, but it might help you bridge the gap. Note, you may be forced to cash out part of your husbands 401K. You need to evaluate the composition of that 401k and the current companies policies on terminated employees. I am not a specialist on 401k rules, you can find more info on the specific 401k benefit board section.

Yes, but with some cautions. First, you can switch the location of any IRA or Roth account via direct custodial transfer. Do not handle the money yourself or you run into a tax witholding. But, before you do this find out if you have any termination and exit fees. Some funds are back loaded. Some brokerages will charge $50 to terminate an account. Second, understand up front that research and investment decisions take up time. Also understand that you may be tempted to go for "sure things" and long shots that are more like gambling (one guy on this site lost 75% of this small IRA in less than a year buy backing a volatile single stock). On the positive side, doing it yourself will get you involved in your investments and you will learn more. Just hope the tuition is not too steep. You can try almost all the big online firms like Etrade, Ameritrade, etc. Ask about fees, minimums, etc. You can find lots of this info at their web sites.

I believe that I am correct in saying that viaticals require front end payouts of cash. I don't see how you accomplish this with an IRA that has penalties on early withdrawals. At a minimum, I would expect this kind of investment would require high annual processing fees. Why look so far a field to find an investment when you have 10,000 companies and 10,000 mutual funds to choose. You might even find one of those in the viatical business.

Responding: (1) because you can always take out the contributions to a Roth, putting "all" your money in retirement is never that (2) insurance? they don't have kids, so except for ensuring future eligibility (a relatively small risk in your early 20s) what is the point? The surviving spouse can still have a career without worrying about daycare. I sure hope you are not talking about insurance as an "investment". When kids come you have about two decades when a term policy may be financially prudent.

My wife is a teacher in Colorado, and I have tried to understand the PERA system, but your scenarios require a pension specialist who is familiar with the details (devilish that they are!). Buy some time from an expert on this issue. If you roll the 70K into an IRA, you can expect it to grow to about 570K in 22 yrs if you average 10% annually. That asset base could yield a flat $60,000 each year after 2022 for three decades. Initially, you may want to keep the funds with PERA in case of a change in mind, since a return to PERA covered employment boosts the HAS.

I am a little puzzled by your example. Do these folks have other assets to draw upon for the B&B idea? If they don't, then they have a bigger problem. A B&B business that is undercapitalized could be a big problem. The B&B field seems to attract lots of good folks who do not understand the time demands and financial risks. But that is another story. Here is a suggestion that may be useful. They could put the $2000 per year into a either an index fund or a tax managed mutual fund. These have either no or very small cap gains or dividends each year. The assets would hopefully grow and they would owe taxes based upon lowere long term capital gains when they sold the fund in the future. This option buys you some flexibility of timing. If there are other assets such as home equity, inheritance, other family assets, etc. then going the Roth route would eliminate the tax liability but put more constraints on timing. If the husband is currently funding his IRA, he can not also fund a Roth. However, as long as his income is atleast $4000, they can fund (due to recent tax law changes) both his IRA and one for her.

The Roth is a great tax shelter. Very flexible. No specific termination date or payout schedule. Plus attractive inheritance options. Taking $$ out early defeats these advantages. Just because something is an option does not mean it is smart to implement. Before ever considering withdrawals, consider other options such as intra-family financing, home equity loan, margin equity loan, delayed purchase, etc. I sure would sit on my decision for a few months before pulling the trigger. I was seduced by the ten year income average option in the mid 1980s for a corporate pension/profit sharing plan I was leaving. Now, looking back, paying the taxes and taking the money out of the tax shelter was one of the top three financial mistakes I have ever made. Been there, done that... albeit in a slightly different context... so I hope readers will think long and hard about "desheltering" assets.

Congratulations on getting started. You need to make two decisions. First, you need to pick a custodian and these include banks, stock brokers, and mutual funds (or fund families) whose role is to control/supervise your assets. Second, you need to choose a type of investment such as money market account, CD, bonds, stock, specific mutual fund, etc. You can always change both decisions down the road. Since Roth IRA investments often involve many decades of investing, I am not a big fan of low return options like CDs, which ussually means that banks are not a great choice. When an investor just gets started, buying individual stocks is often not very practical and ussually means little diversification. Therefore I would recommend that you initially take the mutual fund route. Note, you can either do this directly with a mutual fund family like Vanguard, Janus, 20th Century, etc. (there are more than 8000 mutual funds) or use a broker like Schwab, Etrade, Ameritrade, etc. that gives you access to mutual funds. Check out the March issue of Consumer Reports for a good overview of retirement investments and a culled down list of 100+ mutual funds. I highly recommend NO LOAD funds that do not charge up commissions. Other good sources for info include Kiplinger Finance, Money and Worth magazines. Every mutual fund and brokerage seems to have info on the WWW these days as well. If you want a very simple plan for getting started: Call Vanguard and select their S&P500 Index fund. You then indirectly own a small piece of 500 companies. Low annual fund expense. Diversified. Simple. You may want to read the comments under "young whipper snapper" Jamison and "help me get started" by Harley at this site. Got specific Qs or personal issues? I will try and respond by email.

You are mixing up two different issues: [1] qualifying for a contributory Roth, and [2] Roth IRA conversion. 1. You need "earned income" to qualify for a Roth. This couple does not seem to have any income that would qualify. 2. Roth Conversion is an option for converting IRA value to Roth value as long as they meet the income qualifications. For example, married filing jointly modified AGI must be under $100,000. Husband assets and wifes assets are separate pools. Any conversion is based upon the value of the asset as of the date of conversion. You can not convert an appreciated asset and get a tax break. While you can make the conversion based upon a specific asset, $$$ is $$$ for tax purposes in the year of conversion. You can convert dollars or assets, they are still valued on the day of conversion. Sorry. There is an interaction between estate planning and IRA/Roths that needs to be considered, along with the difference between forced disbursements and no manditory payout. If this couple still wants to convert they may want to consider a modest conversion each year that keeps them from tax bracket jump. State income taxes also come into consideration. If possible, folks should try to convert in a state such as FL, TX, NH, WY, Alaska that do not have a state income tax. For example, anyone planning to move to Florida in retirement would save money by doing their Roth conversion as a Florida resident.

OK, you got the basics on matching. You also can fund your Roth IRA and your wives. You can hopefully tuck more away. On the wealth front. Your father was on to something, the business ran for a while and was attractive enough to find a buyer. Maybe you should consider striking off of your own if you have the "right stuff". The economy is very supportive. If dad was a successful business person, he probably has a good eye for what traits you have that will work or not work. Ask him about what makes the "right stuff" and what you have and what you may need to develop. If not your dad, then perhaps you should buy a beer for his best business friends (suppliers, vendors, customers?). Ask for honest advice and their assessment of your + and -. I would also suggest you start reading Venture, Inc and the other business start-ups mags. If you are not the kind of person who can strike off on your own, than consider advancing your education to make yourself more attractive. Good luck.

A few added thoughts. If you are serious about building wealth, your very first step is to set aside perhaps 20,000 of your current annual income. You are in the first "build it zone", young professionals in the pre-family period. Sock it away, write a check to yourself each month. Each month. Make it a habit. Roths are a great mechanism, use it now while you qualify. You also want to participate in any matching tax shelter your employer offers such as 401Ks.

1. Look at my responses to "Young whippersnapper..." Q by Jamison for most of your questions. 2. Congratulations for thinking ahead. My opinion is that you can never rely on others to consistently act in your best interests. Investing is no different then other aspects of life, you need to educate yourself. Read the March issue of Consumer Reports on retirement planning and investing. Suscribe to Kiplinger Finance mag. Two hours each month is enough to get you started. 3. How do you get wealthy while still young? If quick means less than 10 years, you may want to read about Bonnie and Clyde. But seriously, outside of inheritances legal wealth can be "built" with work and time. For some this means lots of education and a profesional job. But even people of modest means can built wealth if they play "good defense", that is they consistently spend less than they make. Another wealth building group are those entrepenuers who start a business and make it grow. These are the prudent risk takers. I am not talking about Bill Gates; but rather the carpet cleaner with 10 vans, the local restaurant with 4 locations, the women that builds a cluster of 8 self storage sites. You might want to read "The Millionaire Next Door" by Stanley and Danke which while dry does a nice job of explaining wealth building households. I count about 20 millionaires among my friends. Here is their breakdown: two started a consulting firm in Wash DC, three are senior officers in Fortune 500 firms with huge salaries, another started a economic research firm, one got lots of stock options with a new job and saw the firm get acquired one year later (the only lucky guy, all the options vested immediately), three are 65+ and built their wealth via stocks over four decades. The rest used a mix of 401K, ESOP, matching thrift plans at the company they worked and IRA type investments. Not one of these folks ever had a significant inheritance. Most have technical degrees, Master or PHds in their fields. Only one is a lawyer. The entrepenuers built their first million in 12 to 20 years. Note: no lotteries, no gimics, no commodity trading(sorry Hillary), no penny stocks. You also will not "get rich" by responding to emails and infomerchials on schemes.

Kiplinger mag just published their mutual fund summary for mid year. Relative to the bank/cd vs stock investment issues I raised in prior message, here are the 20 year annualized performance of various asset catagories: Stocks Aggressive growth funds 16.6% Long term growth 16.9 Growth and Income 15.1 Balanced 13.2 International/sector [not enough with 20 yrs in my view] Bonds Investment grade corporate 9.3 US Government 8.3 Kiplinger does not disclose how many mutual funds in each catagory and provides limited info on the definitions. Some hypotheticals based on historical data.... The twenty year data supports the conclusion that if you will be investing for 20+ years you want to be in equities. After two decades, the all equity approach is worth about 3X more than all bonds... using 15% vs 9%. After three decades the stock route grows to 5x the all bonds. At 40 years the difference is 8x. All of these #x ratios grow if you are comparing equities to conservative bank CDs. Investment novices should note that in any given year the performance of equities can swing rather violently and you can have back to back negative years. However, IRA/Roth investments are often held for more than 20 years and the long term advantages of equities (stocks) is considerable.

Congratulations for thinking ahead. Starting early will very likely put you on the path to a very comfortable future. If you each set aside $2000 each year and invest wisely you have excellant prospects for becoming millionaires and then some! Roth 101: Current maximum is $2000 each for husband and wife as long as the total earned income for either exceeds that amount. Recently discussed legislation would increase the contribution ceiling to $5000, but that is likely to be vetoed by President Clinton. Some kind of IRA contribution increase is likely in the next couple of years... but for now your combined max is $4000. I am assuming that you will filled your taxes as "married filing jointly" for this year. IRAs (all kinds) are INDIVIDUAL accounts. Your assets will be separate from your wife's assets. 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 since you are just getting married I think you can ignor that for a while! 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. You mentioned going to a bank after you get married. I sure hope you are not thinking about a savings accout or a CD. You are looking at 40 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 fee) 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. Why stock? Because over the long haul, stocks traditionally out perform savings accounts, money market accounts, CDs and bonds. Different asset classes may out perform 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. Then after your assets grow, you may want to invest in individual stocks. Since you are in the learning mode, I would suggest that you and your wife read up on mutual funds in that Consumer Reports issue that focuses on retirement planning, or in Kiplinger Finance, Money or Worth magazines. You might learn more if you each pick a different fund. After a year, compare results. Then either add the next year contribution to the first two funds, or pick another pair of funds. While you don't want new funds every year, what you will learn from tracking a few funds initially will be valuable. 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. Good luck with your marriage. I will try and answer additional questions here or if you wish to email.[Edited by John G on 07-31-2000 at 12:32 PM]

You already appear to have tapped into some of great retirement options for your situation. If at a later date, you are no longer MFS and your income is below the threshold you may be able to convert some or all your retirement assets to a Roth. You know, if you really want to save on state taxes you might want to live in one of the 8 or so states that have no state income taxes.... such as NH, Wy, Alaska... I used to know all 8 states. Great places to make Roth conversions. The great irony for me is that I live less than 200 miles from Wyoming!

Get used to the fact that IRAs are restricted in many ways compared to other kinds of investing. For example, you can not margin your account to buy more stock then your available cash. No custodian will allow you to expose an IRA to unlimited risk such as naked puts/calls. Only some IRA custodians will allow you to sell a covered call associated with an equity position you hold within the IRA. You can not make an "arrangement" that allows you to transfer funds into an IRA related to positions taken in other accounts. The reasons for these limitations stem from both IRS regulations, IRA rules and custodian reluctance to support non-traditional investments. You can not play a position within and IRA against a position outside an IRA. The only way to "get funds into an IRA" is to make a contribution or complete a transfer funds from another retirement vehicle. Forget the schemes. If someone tells you such schemes are legal or can work, find yourself another company with which to conduct legal business.

Above info is correct. Since there is not tax obligations for buy/sells within a tax sheltered account, your tracking should be directed towards what you personally need to follow the performance of you portfolio. Note, there is also no distinction between long term and short term holdings. Unlike taxable portfolios, holding periods are meaningless. Consider the situation were you have bought the same growth/tech stock in both your Roth and regular investment accounts. Two months later the stock spikes up. You might be reluctant to sell shares from the taxable account and pay the short term rate, but there is no tax issue if you sell shares in your Roth. So, in this example, the person might sell shares in the Roth while continuing to hold the block in the taxable account.

Some additional points that may relate to your question. The negatives of having multiple Roth accounts can include: more paperwork, more statements, extra account fees, etc. Some may view these as trivial. You may not be more diversified if you have multiple accounts. For example, if you have mutual funds in three different locations that have a growth slant you may find that they all own Intel, Cisco, Mr Softy etc. Combining accounts is not very difficult. You can do this by getting the paperwork from the custodian who will receive the funds. Return it filled out and they will notify the other custodian to do a direct transfer.