Roth

[Guest mts74]

I have an existing roth IRA with a mutual fund company. I want to make future roth contributions to a new company. Does anyone know if this is allowed? Would I have to close the first account. FYI I have not made any contributions so far this tax year. Are their any penalties or taxes I should know about? Thanks for the help.

[Appleby]

I have an existing roth IRA with a mutual fund company. I want to make future roth contributions to a new company. Does anyone know if this is allowed? Would I have to close the first account. FYI I have not made any contributions so far this tax year. Are their any penalties or taxes I should know about? Thanks for the help.

You can make your new Roth IRA contributions to your new Roth IRA. There are no rules against maintaining multiple Roth IRAs, as long as the total contributions that you make to one or more of those Roth IRAs for the year do not exceed the limit in effect for the year ( $5,000 for 2009- $6,000 if you are at least age 50 by the end of the year).

You may want to think about the fees that you will pay for each IRA, so as to determine if it makes sense to maintain the two separate accounts, or if it is better to combine the accounts. For instance, would you be paying two maintenance fees? Will you pay more trade related fees – which could be the case if you want to buy 100-shares of a certain stock and do not have enough funds in one Roth IRA and therefore need to buy some shares in one and the rest in the other?

[GMK]

That's good advice from Appleby (as usual).

A no cost way to get a lot of answers about Roths is to check out a book or two from the library. Basic books on investing will have a chapter on Roth IRA's, and there are books that talk about nothing but Roths.

One thing you should know is that all the Roth accounts to which you contribute are treated as one Roth. You may have contributed to several Roth IRA's at one or more fund companies, but when you take your money out, they all get lumped together as if they were your one big Roth.

For example, before you can take money out of a Roth free of taxes, you have to have had a Roth for at least 5 years and you have to be over the age of 59-1/2 (or disabled or dead or in some cases for a first time home purchase). So, if you started that first Roth IRA more than 5 years ago, that counts for all your other Roth IRA's. The 5 year wait does not start over for each new Roth account to which you contribute. (An important exception is that a conversion of a traditional IRA to a Roth IRA has its own 5 year waiting period.)

You might find the following link useful. It has examples that make things more clear.

http://www.fool.com/money/allaboutiras/allaboutiras06.htm

and this link has a list of what happens in what order when you take money out of your Roth:

http://www.schwab.com/public/schwab/invest...lvl2=retirement

Hope this helps.

[John G]

It sounds as if you have a direct connection with a mutual fund company for your Roth. That's clearly one option. Often a fund is part of a "family" of funds and you can open a second fund at the same company.

Another fund option is to place your Roth $$ with a Etrade, Schwab, Fidelity or other brokerage. Generally, brokerages give you connections to hundreds if not thousands of mutual funds (their own and others). So, you can have one account but have multiple holdings or portfolio pieces. This can be convient for some, and sometimes you can reduce the annual fees....although most reputable firms have responded to market pressures by keeping fees low.