Ask MetaFilter posts tagged with Roth

Please help me decide between Fidelity and Vanguard.

salvia — Sun, 06 Apr 2008 16:37:09 -0800

Questions about opening a Roth IRA -- particularly, does it matter where I open it? If so, Fidelity vs. Vanguard? I want to open my first Roth IRA. I've read past questions and some online resources, but I still have some questions.

- First, does it even matter where I open it? If I figure out I screwed up, how hard is it to switch from one of these to the other?

- I will (very soon) have a 403b with Vanguard through my employer. Does that tilt things in favor of Vanguard for an IRA? Would I be able to "pool" these funds? It sounds nice to make one phone call rather than two. But is there some reason that tilts things in favor of Fidelity? Would it be better to have them both as options? Then I could hold, say, some of both group's target retirement funds.

- To make a good decision, do I need to figure out where I would invest the money first? They have different expense ratios even for their S&P 500 index funds (VFINX is .15% vs. FSMKX is .10%). I realize this isn't much of a difference, but if they differ on the simplest index fund, they're going to differ by more in other things, right? (I'd be deciding between S&P 500 index funds, some index fund with non-US companies, or a target-date retirement fund.)

- If you do think I should decide where to put the money first by actually looking at fees, how do I find that out? There are these scare stories (eg) about hidden fees. Are they still hidden if I look at Morningstar's front load %, back load %, and expense ratio? Or is there a better place to find all this out?

- All over the web people are saying that Fidelity's customer service is better and more informed. This has me leaning toward Fidelity. Do you think this still holds true?

- Lastly, what does this comment from jak68 mean, "Also -- in case you didnt know -- there is a small difference between buying funds via a trading account at a brokerage house (as with fidelity, schwab, ameritrade etc), VS. buying the fund directly from the fund family's website (vanguard, etc)?" Should this influence me in some way?

Thanks for your help. I'm interested in learning more over the long term, but I also have the feeling that I'm making this too complicated and should find a way to make this simple.

Roth IRA contributions?

ruwan — Wed, 19 Mar 2008 07:27:02 -0800

Can I contribute to my Roth-IRA from my savings account if I don't earn an income? I am currently a grad student, living solely off student loans. I don't use all the money I get in loans, so I have it stored in a high-interest savings account until I need it. Can I use the extra money in my savings account to contribute to my Roth IRA (less than 2000/yr)?

Since I don't earn an income, am I eligible to contribute to the IRA? (I can't find anything online that states that I am not eligible. References would be great.)

How can I contribute to my IRAs as soon as possible?

Flunkie — Wed, 05 Mar 2008 18:19:10 -0800

How can I contribute to my IRAs as soon as possible? For tax year X, you are allowed to donate to IRAs at any point between January 1, X, and tax day, X+1. I would like to donate as soon as possible (January 1, X), and I generally have sufficient funds to do so. However, I do not do so - I am held back by my limited understanding of tax law.

I have three different IRA accounts: one that I've made Roth contributions to, one that I've made traditional deductible contributions to, and one that I've made traditional nondeductible contributions to.

My financial situation is, has been, and likely will be such that it is never entirely clear how much I will be allowed to contribute for each type of IRA, until my taxes are actually done. So, I never know how much to put into each account until I do my taxes.

This causes me to essentially lose a year (and more) of tax-friendly growth from every contribution, every year.

Is there a way that I can legally, easily, and safely get around this problem, and actually donate on January 1 of every year for that tax year?

For example, I think the best would be if I could just have a single IRA account that is allowed to hold all three types of contributions. If that's possible, then I could just dump the max in on January 1 of year X, and (just as I do today) figure out and report the exact breakdown when I do my taxes for year X in year X+1.

Or perhaps there's a way to move excessive contributions of an account of one type to an account of another type, without penalty? Again, then I could just dump in the max to one account on Jan. 1, year X, figure out the breakdown while doing taxes in year X+1, and then actually move funds between IRA accounts to make up for the difference.

In that case, though, what if I had, say, purchased stocks with the funds in the meantime? Do I move a number of shares that, in cost basis, corresponds to the amount I'm adjusting by? Or is it more complex?

Any information, suggestions, or advice on this would be appreciated. Thanks.

Tax Hell

mand0 — Thu, 21 Feb 2008 05:30:03 -0800

I forgot to claim a $4,000 contribution to a Roth IRA account during the 2006 tax season. How do I go about claiming this in the 2007 tax season? (more inside) Now as far as I understand, claiming a contribution to a Roth IRA on your taxes can only help you (i.e. give you a larger refund). So I shouldn't be in any trouble for forgetting. Is that correct? Can I claim the contribution I made in 2006 in 2007 or do I have to amend my 2006 tax return?

Just want to do my homework before I visit a tax professional, thanks :)

Can I withdraw money for a first-time home purchase with my accounts?

InvestorMD — Thu, 20 Dec 2007 20:43:24 -0800

You can use your Roth IRA for your first time home purchase (up to 10k). However, you must have the account open for 5 years. How is account defined? I have a Fidelity Roth IRA account open for 6 years now. I have a T.Rowe Price Roth IRA open for 2 years. My wife had a John Hancock Roth 401(K) (open 2 years ago) which we rolled over to a T.Rowe Price Roth IRA when she switched jobs back in August.

The rules stipulate that the account must be open for 5 years? Does this included the general umbrella of the Roth IRA or each single account under the umbrella? We plan on buying a home after I am done with medical school. We were thinking to put some more cash into our Roth's for the time being and wanted the flexibility of withdrawing our CONTRIBUTIONS for a down-payment if needed.

On a side note, can this money be put back or will that count as new contributions? I expect my income level will make me ineligible for contributing to a ROTH after I'm done with the 3+ years of medical school and 4-5 years of residency. Hence, why we are trying to contribute as much to get ahead start.

Using 401K & Roth IRA to purchase second property

endlessknot — Sun, 18 Nov 2007 12:22:18 -0800

Using 401K & Roth IRA to purchase second property ?? Is this possible ?? Any suggestions. Thanks, ek

PATRIOT Act + Roth IRA?

comwiz — Thu, 07 Jun 2007 16:09:38 -0800

What provisions of the PATRIOT Act govern the opening of my Roth IRA? I recently opened a Roth IRA through T. Rowe Price. In order to meet certain "PATRIOT Act" requirements, I am being required to mail in a W-9 form and photocopies of my Social Security card and drivers license to T. Rowe Price.

What part(s) of the PATRIOT Act require my IRA custodian to have these on file?

Does it make sense to (and what are the tax implications) of converting IRA funds into a Roth IRA account?

mintchip — Thu, 25 Jan 2007 10:46:06 -0800

Does it make sense to (and what are the tax implications) of converting IRA funds into a Roth IRA account? I have heard that some financial advisers recommend Roth IRAs over traditional IRAs. I am a student and therefore my income is extremely low. A friend said that if I want to do an IRA to Roth IRA conversion, now would be the time as the taxes I would owe will be less than if I had a higher income since I'm now in a lower tax bracket.

My questions are:

1. What are the benefits of having a Roth IRA over a traditional IRA?
2. Will these benefits still hold true if in some time in the future I borrow from my retirement funds to purchase my first home (I have no plans to do this anytime soon).
3. How can I determine how much I will owe in taxes for the conversion?
4. Is there anything else I need to know?

Which IRA/broker/funds to get when facing retirement in 20 years?

fizzyliftingdrink — Fri, 03 Nov 2006 17:41:15 -0800

A friend in her mid-40s is, for various reasons, only now getting a belated start on planning for retirement. Help me point her in the right direction! I've read several of the previous threads on IRAs, and they have been helpful, but I haven’t come across anything that specifically addresses this situation (i.e., starting late, not having any investment experience, and not having much to invest). I have a 401k through work with funds that I’ve "set" to match my own risk profile, but don’t have much experience beyond that (though I guess I should consider an IRA too). Questions:

- Roth vs. Traditional? I keep hearing that the Roth is better in terms of income potential, with the tradeoff being that you can’t take the tax deduction when you put money in. So I'm assuming a Roth is the one to get; however, if there is a good argument for opening a traditional IRA (or both), I’m all ears.

- What are some good options for an inexperienced investor with not a lot of income? I’ve heard good things about the Vanguard Target Retirement Funds, for example, but she doesn’t have the required $3000 for the initial investment. Are there similar options without the initial lump sum that will adjust automatically for her risk situation over the next 20 years?

Thanks for any help.

Beginning investor, seeking basic opinions and links for more research & self-teaching!

Anonymous — Fri, 27 Oct 2006 10:20:06 -0800

Total beginner to investing and finance, researching how to start investing maybe $2K each year, mostly in socially responsible mutual funds -- and how a young, healthy person should balance retirement investment with other kinds of investments. (I'm coming from a low-income background, so I haven't watched people invest or had people talk to me about it -- I'm very open to criticism if you see me missing important points.)

Quick background: U.S. citizen, female, almost 30, no medical issues at all (yet) and hoping to live 50+ more years. No existing investments now, and hopefully never a 401K (editorial/creative freelancer and totally in love with my work -- so I'm saving for "old age / medical care" rather than "sudden end of salary"). I have a simple standard of living (for an American) and want to live simply my whole life. I don't want kids. I have an emergency-fund in an account that earns close to 5% interest but is totally liquid. Other than that I have no savings or assets to speak of, but I'm debt-free. I'm hoping to spare maybe 2K/year, from now on, to invest.

So far, my research suggests I should have a Roth IRA. I want most of my Roth contributions to go in a socially responsible mutual fund (let's accept for this thread that I've done enough research to decide that "responsible" is more important to me than "highest interest regardless of sources"... if you're interested in debates on responsible investing, see here and here; chart of responsible funds and their relative performance here). So I'll need an account in a brokerage where I can do everything by myself online (possibly Scottrade or Ameritrade -- opinions?).

Once I have this account, can I also just buy individual stocks from any companies I like? Will it be clear in my account how to designate each new contribution as either part of my Roth IRA or part of a shorter-term investment? And actually, is it important to balance my Roth contributions with other shorter-term investments, or should all my $$ go into my Roth (since I could withdraw my original contributions from it in an emergency)? For stocks, are there databases where you can search stocks by, say, a combo such as industry type + price for one share + different performance indexes? Maybe even with flags (either self-applied or third-party) for "green"/"responsible"/etc.?

Thanks for any and all answers and/or suggestions re. where I should go to teach myself more!

Roth IRA Niceties

bink — Sat, 14 Oct 2006 20:02:34 -0800

Are there tax consequences from buying and selling stock within a Roth IRA? I've got a Roth IRA, a rollover from a 401(k) from an old job, and one of the stocks in it is doing well enough that it unbalances my portfolio and makes me a little nervous. I would like to sell a bit of it and invest the proceeds in either the mutual funds that are already within that IRA, or a new stock or fund.

I believe this should be permissible, but what I am trying to be sure about is:
1. Come tax time, what do I do about the profit I've made on the sale?
2. What about the fees/commissions charged by Ameritrade? Do I have to put that money back into the IRA?

It was all going so well...

forallmankind — Sun, 13 Aug 2006 16:22:03 -0800

I'm confused - I want to plan for my retirement and have got as far as applications for a 401k and a Roth IRA; but then it all goes hideously wrong.... I am reasonably financially illiterate so I'd been reading jdroth's Get Rich Slowly and Ramit Sethi's I Will Teach You To Be Rich and ran off to open a 401k and a Roth IRA.

Stage 3 of the 401k application process is Choose Investments, at which point I have pick from 16 choices: all 16 mean absolutely nothing to me.

When I apply for a Vanguard Roth IRA and hit Learn More About Vanguard Mutual Funds, I'm told that I can "Choose from among more than 100 low-cost pure no-load Vanguard® mutual funds". I rather suspect that these 100+ mutual funds will also mean absolutely nothing to me (although I do understand the value of no-load).

So how do I learn about these things and make educated decisions? It's clear that I have absolutely no idea what's going on, but I want to get these things started now and I don't really have the time to take a degree in investment banking - how do you guys do it?

Roth IRA: I contributed too much. Now what?

sdis — Fri, 24 Feb 2006 10:16:46 -0800

Tax Attorney Filter: I contributed too much to my Roth IRA 3 years in a row. Should I be worried? After reading financial advice articles, it seemed wise to open up a Roth IRA and dump in the maximum every year as early as possible, so I started in '03, and have made 3 maximum contributions for '03, '04, and '05. I did this using money in an investment account I had when I was a kid and got control of when I turned 18.

However, I'm a student, and make effectively no money. After deductions, I made $319 in '05, which is apparently the maximum I can contribute to my Roth IRA for '05. My accountant suggested I ask my broker to roll my 2005 contribution (minus $319) over to 2006. When I asked about the previous 2 years of apparently illegal contributions, he said that he had never encountered this situation, and has no idea. He doesn't know whether the IRS really has any record of IRA contributions.

Do I have anything to worry about here? If so, what should I do? If not, do I even need to roll the '05 contribution over to '06?

How do I choose a bank for my IRA?

scazza — Wed, 22 Jun 2005 07:05:14 -0800

I want to open a Roth IRA account. How do I choose the bank? These threads have been helpful, but I'm still wondering about the IRA specifically. I've been wondering about this a long time, so any feedback, experiences would be helpful. What banks have mefites had good experiences with their IRAs? Should I just stick with the bank that has my checking account and have it all in one place? Or is investigating other bank's track records with investments imperative? Are there resources for comparing banks' IRA packages other than just visiting their websites and comparing? Why doesn't ING offer IRAs?

Please help this financially ignorant person, and be easy with the snarkiness, I'm an easy target.