Ask MetaFilter questions tagged with rothira

Convert now or later?

susanvance — Sun, 06 Dec 2009 17:26:36 -0800

Should I wait to convert my Traditional IRA to a Roth? I've got a Traditional IRA that I'd like to convert to a Roth, especially since I've got the savings to do so now. I'm 28, single and have no dependents. I'l need to split the conversion over 2 years to stay within my tax bracket, so I've been planning to convert 1/2 this month, and then 1/2 in January 2010.

However, when I called to get the paperwork to do so, the guy I spoke with strongly implied that it was a Very Bad Idea not to wait and do the whole conversion in January (even though they can't officially give advice). I am very aware that 2010 conversions will be allowed to split the tax payments over the following two years. But since I have the cash in hand now, why would I wait?

My main concerns are:
- I don't like the idea of that amount hanging over me for the next two years, especially since I don't know now if my income (or taxes themselves) will be higher in 2011.
- I suppose I could put the money I'd spend on the conversion towards funding the Roth further now, but I'm nervous about not having enough future savings to make the tax payments later. Similarly, the gains seem fairly small if I instead put that money in a CD for a year or two, given that current rates are only around 2%
- It's possible that I'll apply to grad school during the next year or two, and I wouldn't want earmarked savings to lower my loan eligibility.

green roth IRAs du jour

Anonymous — Mon, 13 Apr 2009 20:52:30 -0800

What are some environmentally and socially concious mutual funds that I should be switching my $2k roth IRA to? Since Washington Mutual is switching to Chase, if I figure this out before 4/20, I don't have to pay the $75 transfer fee, so now's the time!

What to do with my money?

atayah — Wed, 29 Oct 2008 06:28:16 -0800

New to 403(b)s... should I do an IRA instead? I just switched to a nonprofit job and was given the option of opening a 403(b) account with a financial institution of my choice. I'm fairly young (27), so would be looking for moderately aggressive investments with low fees. TIAA-CREF seems to be well-regarded, but I'm wondering what people's experiences have been (good or bad). My last job was with a for-profit employer that handled my 401k, so I don't really have any experience with a financial institution.

I'm also wondering whether or not I should think about investing instead in a Roth IRA, which would allow me to make a withdrawal for a downpayment for a house later on. If I invested in a Roth IRA, I know I'd have to pay taxes now on the investment, but I'm wondering if it would be offset since I could invest in a house much earlier than if I invested only in a tax-deferred 403(b) account.

I know You Are Not My Financial Advisor, and my partner and I are planning to see one in the near future.

Get Rich or Die Tryin'

Anonymous — Mon, 27 Oct 2008 17:16:34 -0800

Financial advice-filter. I'm a college student with no debt and negligible living expenses. Where should I be putting my income? I'm a college student who is lucky enough to have parents footing the entire bill for college, hence I have no student loan debt. I'm also living at home and not paying rent or for groceries, or for anything except incidentals, really. I know how incredibly fortunate this situation makes me, and I want to do everything I possibly can to ensure that I am financially independent from my parents as quickly as possible, while understanding where to invest my money and why.

I have a part time job where I take home between $220 and $300 a week after taxes. Right now it's going directly into my online savings account, which currently has an APY of 3%. I have about 5k socked away in this account. I also have a Roth IRA and an investment portfolio (mutual funds, etc.) that is managed by a financial advisor and about which I know very very little.

My financial goals are manifold; I would like to own a home within the next 10 years and I'd like to save prudently for retirement. I also have a pipe dream of opening a small business.

That said, where should I be putting my money right now? I'm young so I'm not risk-averse, but I also have some short term financial goals like owning a home and opening a business. I was planning on maximizing my contribution to my Roth ($5,000 for this year), but that would leave me with very little left over to put into my portfolio, which I'm told (by Warren Buffett, among others) is a good idea right now since the market is so depressed and I have a long time to make my money back. (Buy low, sell high and all that.)

Or...should I make sure I have a decent emergency cash fund before I think about doing any of these things? I plan on graduating college in 2010 and there's no guarantee in this economy that I'll be able to line up a job right away, so it'd be nice to know that I could still pay 6 months' rent someplace. Or should I open a CD or a money market account to save specifically for my short-term goals at a higher return than my savings account?

Clearly I already have some money put away in various places but I would really like to start taking more responsibility for my own finances. Additionally, any recommendations for good places for young investors to learn about managing their own money, along the lines of the Motley Fool or Get Rich Slowly? I've also read Suze Orman's book geared toward young people but that was mostly about getting out of debt (which I am not in) and advice that might have changed based on the conditions of the economy right now.

(Anonymous because I'm not too comfortable talking specifics about money publicly.)

MAGI May (Be Headed North of $100k)

Anonymous — Thu, 26 Jun 2008 09:09:13 -0800

Will opening a Solo 401(k) before year's end reduce my modified adjusted gross income (MAGI)? I'm a 28-year-old freelance worker with a sole proprietorship, and I'd like to be able to fully fund my Roth IRA for 2008 It looks like I will soon reach $100k in earnings for the year, and I'm starting to think about ways to reduce my MAGI in order to be able to contribute the maximum amount allowed ($5000) to my Roth IRA.

From what I can tell, contributions made to an employer-sponsored 401(k) will reduce my MAGI, but does this reduction occur with self-employed (aka Solo) 401(k)s? If not, does anyone have any additional advice for reducing my MAGI?

What should I do with my Simple IRA?

junkbox — Tue, 13 Nov 2007 12:17:59 -0800

I have a Simple IRA from a previous employer. Should I roll it into my 401(k), convert it to a Roth IRA, or do something else entirely? I contributed to a New York Life Simple IRA through my previous employer (small % of employer matching, 100% vested) from 2004-2005. I never bothered to roll it over because it's such a small amount of money (Google research supports the idea that come 2008, I can roll my Simple IRA into a Roth IRA in one step. (I meet the qualifications for a Roth IRA; married, filing jointly, income below $100,000.)

* Am I going to incur a bunch of fees or other nonsense that would make this a silly idea? Should I roll it over into my 401(k) instead?

* Is there a smarter, more flexible or financially savvy thing I should do with my Simple IRA that I haven't thought of yet?

* Finally, if I go with a Roth, where's the best place to open it?

Selling shares within a Roth IRA

electric_counterpoint — Fri, 13 Jul 2007 10:16:10 -0800

What are the rules about selling shares held in a Roth IRA? Warning: still a bit of a finance n00b... Maybe I am just Not Clear on The Concept, but it seems to me that, when the market's had a good few years and the stocks and funds I hold are up, I should sell them and lock in the gains. Since they're good companies (or good funds, as the case may be), I'd probably repurchase them with the proceeds. At least, this is what I would do if I owned these shares in a traditional brokerage account, but I own them within a Roth IRA. However, I can't find anything online about anyone doing having done this, let alone any advice about it!

I know that I can't sell my shares and divest from the IRA completely without paying an early withdrawal penalty. I also know about capital gains taxes and the wash sale rule and all that, and I know that those apply to taxable accounts. Are the same rules in place for Roth IRAs? Am I just missing the point of an IRA, or what?

How to Diversify Retirement Account

ThePinkSuperhero — Mon, 15 Jan 2007 08:54:27 -0800

I'm planning to diversify my retirement account in the next 5-7 years. I need some advice on the best way to do this. I have a Roth IRA with Vanguard. I currently have one fund in my account. I'm planning to add 3-4 more funds in the next 5-7 years (I already have my asset allocation planned out, so no suggestions are needed). Here's my question: does it make more sense to make monthly deposits to the one fund I'm currently in, and then buy new funds from that fund, or to withhold monthly deposits, and buy new funds with cash? Or does it matter? I feel like it must matter on some level, but the math of it is beyond my skill level.

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!

Help me choose an index fund.

Pontius Pilate — Mon, 04 Sep 2006 20:16:01 -0800

Help me choose an index fund and a financial institution. So, after reading all the helpful threads about the importance of Roth IRAs and and the benefits of investing in your retirement as early as possible, I am ready to take the plunge. I have about $2k to put away now, and I should easily be able to put away another $2k before next April to max out my Roth IRA contribution for this year.

The last step is selecting my financial institution and the particular index fund I'm going to invest in. From comparing rates and user reviews, I have heard good things about Vanguard, Sharebuilder, and Fidelity. However, I'm kind of a novice to investing, so I am not sure that I am absolutely fully aware of all the fine print and miscellaneous fees that will reduce my return. I would really like to hear people's personal experiences with these three companies (suggestions for other companies gladly welcomed, of course), and what has worked out best.

As far as index funds - I am starting out young, so I'm strongly considering something more aggressive than the standard S&P 500, DJIA, NASDAQ, etc. Would something like Emerging Market Value / Emerging Small Cap be appropriate? Would it be totally foolish of me to invest only in the higher-risk indices, ignoring the safer but lower-return conservative index funds?

Roth IRA at ING?

Amy Phillips — Tue, 22 Aug 2006 08:48:59 -0800

Is ING Direct a good place to have a Roth IRA? Other suggestions for easy, cheap plans? Can I do this without hiring a professional to advise me? I want to open a Roth IRA, but I don't have a lot of money to start with (a few hundred initially and maybe $100 a month thereafter) and I want to get a good deal. Is ING Direct's Roth IRA a good choice compared to other Roth IRA plans that I could open and manage on my own without paying for professional guidance?

I'm investing in a 401(k) through work, but there's no match, and I want to minimize my taxable income in retirement. I have savings and checking accounts at ING and PNC Bank. I like to minimize the total number of institutions I have to keep track of, and ING's online interface seems to make things really simple. But I'm willing to go to an outside company if that's really what makes the most sense financially.

A few specific questions: Everyone says "choose a plan with low fees." How low is low enough? 1%? 2%? Also, is it safe to just invest in the "agressive" plan if I'm not planning to retire for 40+ years, or do I need to do something else to manage risk? Are there any other factors I should take into account when choosing a company or choosing plans within that company?

I know similar questions have been asked before, but the companies' offerings seem to change very quickly and I think some of the answers from a year or two ago are outdated. Thanks for your help!

When should I open my Roth IRA?

electric_counterpoint — Fri, 12 May 2006 10:18:27 -0800

Should I open my Roth IRA now and buy what I can afford, or wait until I can afford the minimum investment in the fund I really like? I know it's important to plan for retirement. I've got an existing stock fund that I've been kicking around since high school with a little more than a thousand dollars in it. I'd like to cash this in and open a Roth IRA.

The fund I really like, though, Fidelity's Freedom 2040, has a steep price. I'm a college student, so a $2500 minimum investment is at least a temporary setback. Should I open my IRA now and put what money I have from the sale of (most of) my current portfolio in it, invested in a money market or something? Or should I hold off on selling everything until I have what I need to invest in the fund?

Bonus points awarded if you can answer these questions:

1) Is there a particular time of the year when it's most beneficial to sell stocks, or when it's best to open an IRA?

2) Can you point me to a good source of advice on when to sell stocks advantageously? I know the longer I've owned them up to, what, 5 years, the lower my gains tax, but what else should I be aware of?

3) Should I, as maybe a third option, try to convert my taxable investment account into an IRA before selling? Is that even possible?

4) Am I right to like the Fidelity Freedom 2040 fund? I'll be 55 at its nominal, glorious culmination, FWIW.

401(k) vs Roth IRA?

ShawnString — Wed, 30 Nov 2005 09:33:48 -0800

401(k) vs Roth IRA? Rollover? Confusion.... My wife left her job in May, with a ok sized 401(k) account. she hasnt done anything with it, no contributions or deductions. we want to be able to have a little more access to that money just in case (new baby due in jan), and half listened to a thing on NPR about Roth IRA. Tried googling and only got more confused....so any links, advice, etc would be greatly appreciated.

401K Investments

amberglow — Thu, 29 Jan 2004 20:03:16 -0800

InvestmentFilter: So I'm permanent now at work, and have to pick a 401k option. I don't think i'll be there for many years, and cashed out the last time I had one. (But then again, i'm older now, and 70 is only 31 years away).What do you guys suggest for a 1-3 year timeframe, 401k-wise, given the fluctuating market? (If I need to, I have absolutely no qualms about cashing out again, and have never had much faith in the market at all, in general.) oh, my first thought is not to do it all, and do Roth IRAs or something like that, but then i'd lose out on the matching funds (which kick in after 1 year there).