Can no longer contribute.

[Guest shirley]

We can no longer contribute to our Roth IRA's because of income, and maintenance fees are far more than our meager earnings. Accounts have only been open for 4 years. What can we transfer the funds to without losing a big chunk to penalties and such? We have college on the near horizon for 2 kids.

[John G]

You don't indicate the total amounts, types of investments, annual fees and the recent earnings. Without these, offering a response is a lot of guesswork. Here are some ideas:

1. Ask you custodian to waive the fees. Some will do so to retain a customer.

2. Consider consolidating the accounts to reduce the fees at the existing custodian. This might work if your Roth is scattered among multiple mutual funds, each with an annual fee.

3. Consider transfering the assets to a custodian that either does not charge fees or charges less. Ask custodians with whom you already have a business relationship, and ask them to waive the fees.

4. Shift other assets to the custodian if they give you a break when the total assets exceed 10, 20 or 50k.

5. Have patience. You had a couple of years of chop. I would expect that the next few years will be more normal. No guarentees, but the smart money started flowing back into Wall Street four months ago. Performance normally should be able to cover fees.

The March issue of Consumer Reports does a great job of providing a concise review of retirement planning. It may give you some other ideas on your 4 year old IRAs.

The IRA is a wonderful tax shelter. Don't scoot out after a couple of bad years - they do happen and are unpredictable. I assume from your kids to college comment that you should be in the cycle of building assets and the IRAs are a good choice for investing. Perhaps you can shift a bonus or sell some stocks for losses to get back under the income threshold. There may be some loosening of the income noose on Roths so that is another reason to hang in there.

Hey, the bright side is that if you can no longer meet the income qualifications... you have gotten up into the top 5% of the US.

While you can take contributions out of the Roth without penalty, where are you going to put them? Does it not make more sense to reduce the fees if possible and just ride it out for a while?