Ira Roth

Frequently Asked Questions

1. QUESTION:
   can I have multiple account of IRA roth with different institution?
   can I have multiple account of IRA roth with different institutions – actively contributing? what about is I stop contributing on the 1st account and open another account ?

   • ANSWER:
     Yes, you can open a new account every year with a different institution each year if you wish. You can contribute up to ,000 this year in total.

2. QUESTION:
   What is the difference between a Roth IRA and a Roth IRA term cd?
   What is the difference between a Roth IRA and a Roth IRA term cd? Does the Roth Cd act like a regular cd but with tax free interest? When the Roth CD term is up, do I have to roll it over into another Roth Ira cd? If I end the Roth Cd at the end of the term, is there a penalty?

   • ANSWER:
     Let me explain. You can take the money out of the Roth IRA account at anytime, but you may need to place the money back into the account or you will be taxed. A Roth IRA is a retirement account which requires 00.00 and may be withdrawn when you are 59 1/2. You will not be taxed as long as you take this money out after your 59 1/2. Take the money out before 59 1/2 and you may be taxed. A Roth IRA CD has a higher interest rate than the Roth savings account. Keep your money in here and you can earn more money. The roth IRA accounts(savings and CD) are designed to be withdrawn after your 59 1/2. Please don’t put your money here unless you want to save it for your retirement. Join my storeonwheels group in yahoo groups when you have money or business questions.

3. QUESTION:
   How to determine proper amount for IRA->Roth conversion for 2008?
   Hi,

   I need to find out 1. whether my wife and I are qualitifed for IRA->Roth conversion this year (2008) and 2. what amounts are proper for such conversion, if we are qualified. Any suggestion or referer to a consultant will be greatly appreciated.

   • ANSWER:
     What is your AGI?
     There is a 100,000 limit.

     www.irs.gov, search on publication 590.

4. QUESTION:
   What exactly is a Roth IRA and should I start putting money in it? Im 22?
   Im 22 and just started my first “real job” right out of college. About to finish paying off my student loan and was looking at also investing in mutual funds and a Roth IRA. What all is involved with a Roth IRA? Does it have its on interest rate or whats the deal?

   • ANSWER:
     A Roth IRA is a tax advantaged account that allows you to put money into it after taxes, and allows the money to grow tax-free from that point forward. Therefore, as your investments grow, you will not have to pay taxes on that money ever again. The only potential downside is that once the money is invested in a Roth, you cannot take it out until you are 59.5 years old (government regulation). But, there is a huge advantage to having your money grow tax free.

     And once the money is in the Roth IRA account, you can invest in anything you want – stocks, mutual funds, bonds, etc. It is the perfect savings tool for someone in your situation.

5. QUESTION:
   How can I start a Roth IRA with my money?
   I want to open a Roth IRA with a check I received as gift. However, it is greater than my annual income.

   I know that money contributed to a Roth IRA must be taxable income. Is there a legal way around this?

   • ANSWER:
     No there isn’t a “way around it” – sheeez, it seems like all I see on Yahoo Answers are people looking for some way to beat or scam the system. There are limits on how much you can put annually into a Roth or any IRA for that matter. No mutual fund company or bank will take more than that limit.

6. QUESTION:
   Is an excess Roth IRA contribution taxable when withdrawing it after the tax filing deadline with extension?
   I contributed 00 to a Roth IRA in 2006, which caused an excess of 00. It is now after the tax-filing deadline with extension. I know that there is a 6% excise tax penalty already. My question is: Are there any taxes if I withdraw the 00? And would the early distribution penalty 10% apply since I am under 59 1/2?

   • ANSWER:
     You need to withdraw the ,000 plus any earnings attributable to the ,000.

     You will pay an excise tax of 6% on the ,000.
     You will pay income tax plus a 10% penalty on any earnings that have been withdrawn.

7. QUESTION:
   Roth IRA help – What type of funds to invest in for someone who knows little about investing?
   I’m 34 and want to start a Roth IRA for myself and plan to to contribute the max amount in one contribution each year. I know I want to go with either Fidelity, Vanguard, or T. Rowe. I know very little about investing and would like to feel secure with the investment. I know there are too many funds to choose from and I don’t understand them. Thanks for your suggestions.

   • ANSWER:
     I’m a Vanguard fan myself. If you are just starting out I would recommend their Star fund – which invests in a number of their other funds – it is well diversified with Large, small and foreign stocks and several bond funds. I put my daughters in that fund when they started their Roth.

     Then try reading up – I suggest The Bogleheads Guide to Investing by Taylor Larimore (and others) – it is written for regular people. Also, check out their web site: http://www.diehards.org – just read the answers to what others ask and you will see that they are very kind to people starting out who might have “dumb” questions.

     As you get more money and experience you will want to move out of the Star fund into several index funds.

     You can do it. It really isn’t rocket science. There are a lot in the media that what to make it confusing but a few simple index funds can give you a diverse, low cost portfolio and you don’t have to do a lot of trading – every year or so rebalance to your original plan.

8. QUESTION:
   I moved my Roth IRA to a different institution. How does that affect the 5 year rule for withdrawals?
   I’ve had an Roth IRA for 9 years, but recently moved it to a new institution. If I want to take money out of my contributions, how is the account affected by the 5-year rule? Does this account have to be open for 5 years at the new institution before I can withdraw?

   • ANSWER:
     you have fulfilled the 5 yr rule no matter where it was deposited

9. QUESTION:
   What is the difference between a roth IRA and a normal investment account by a broker?
   1. In both cases I can invest only after tax money.
   2. I can withdraw my money whenever I want in both cases.
   3. I can only contribute ,000 per year in the roth IRA while I can contribute how much I want with a normal investment account.

   So why would I choose to open a roth IRA instead of a normal investment account where I can invest how much I want?

   • ANSWER:
     Any growth experiened in a ROTH IRA account is not taxed. Nor is taxed when you withdraw the money.

     With a standard investment you will be taxed when you realize any profit by selling the investment.

     So take an example where you have a ROTH IRA and a standard investment. Both start at 10,000 and both grow by 10%, to 11,000.

     When you withdraw your IRA (assuming no penalties for ealry with drawal), you will get the full ,000

     When you withrdraw the investment you will have to pay taxes on the ,000 of growth, so maybe you walk away with only ,700.

     This difference could add up to a huge amount over the lifetime of a ROTH IRA

10. QUESTION:
    rolling over pension to IRA savings or IRA Roth?
    My mother is getting to retire with approx. 100,000 from a pension that she needs to roll over to an acct. Is it better tax wise to roll it over to an IRA savings or Roth. She will only be withdrawing appox. 7,000 per year.

    • ANSWER:
      Kelly

      If she rolls it over to a Roth Rollover, she will be liable for taxes on the entire amount… now. If she rolls it over to a traditional IRA, then she pays taxes on the money as she uses it.

      If she is only doing small annual withdrawls, have her put the money in a Large or mid cap stock mutual fund. She might be able to earn as much as she is taking out!

      Soccerref

11. QUESTION:
    When I withdraw money from my Roth IRA, do I have to deduct Federal or State taxes?
    I rolled over a rollover IRA into a Roth, which is now called a Roth IRA. When filing tax return, I had to pay Federal taxes on the whole amount that was rolled over. When I withdraw from my Roth IRA in the future, do I deduct Federal & State taxes from the amount that I am withdrawing, & if so, what percentage do I use. Will I get taxed on the amount of money that I withdraw, when I file next year’s taxes?

    • ANSWER:
      The year in which you transfer/roll the IRA into a Roth IRA is the year you pay state and federal taxes. Once the $ is in the Roth you never pay state or federal taxes on that money again no matter how much it grows………….. hmmmm…. unless the govt. changes the rules down the road…. but for now…. No. You don’t pay again no matter how much the money “grows.”

12. QUESTION:
    What are the differences between a money market IRA and a roth IRA?
    I opened a money markey IRA, and was going to converit it to a Roth IRA (im 23) and have rolled my ,500 from my 401K into my new IRA. When will I have to pay taxes on my ,500 and when will I pay taxes on my new contributions? Im not sure if I should keep the money market, or change to the Roth. Thanks!

    • ANSWER:
      Just for clarity, a ROTH IRA is an account registration. Many investments may carry the ROTH registration status including money markets accounts, savings accounts, brokerage accounts, and mutual funds.

      Amounts that were contributed tax deferred (as in the case of a traditional IRA) are considered taxable income in the year that they are converted to a ROTH IRA. They are not penalized if they are converted to a ROTH within 60 days.

      401(k) plans can not be converted to a ROTH status. Only traditional IRA’s can be converted to a ROTH status. Once a 401(k) is rolled over to a conversion (Rollover) IRA, it can not be rolled over again into a ROTH.

      ROTH contributions are taxable in the year the money was earned, but contributions and earnings are not taxable when withdrawn at retirement (59.5 years of age and older).

      Traditional and 401(k) contributions are tax deferred when contributed, but contributions and earnings are taxable when withdrawn at retirement.

13. QUESTION:
    Can I rollover my roth ira to a different company but also roth ira?
    My agent wants me to roll my Roth IRA to another company (company1)that has better interest rates. Can I roll my roth ira to another company (company2) without penalties?

    • ANSWER:
      Yes, you can. Have the new company do a direct transfer. Technically, they don’t call it a rollover, just a transfer.

14. QUESTION:
    Can I contribute to a Roth IRA if my earned income is outside the US?
    I have both earned and unearned (dividend, investment, interest) income. My earned income is excluded from my US tax return since I’m physically outside the US. Can I still contribute to a Roth IRA?
    Thanks, I thought so. I also assume I have to exclude either all or none of my foreign-earned income if it’s below the threshold.

    • ANSWER:
      According to IRS Pub 590, for purposes of a Roth IRA, compensation does not include:

      Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

      So if all your foreign income is excluded, you will not be able to set up any type of IRA.

15. QUESTION:
    What happens to a Roth IRA when you make too much money?
    I understand the difference between a Roth and Traditional IRA, but I haven’t found any information on this technicality.

    Let’s say I open a Roth IRA because I don’t have enough income to make me exempt. Then I start making more money and open a Traditional IRA. What happens to the money in the Roth IRA? Can I keep investing with it capital gains tax free, or does it roll into the Trad IRA? What are the tax consequences?

    Thanks for your help.

    • ANSWER:
      Basically, you won’t be able to contribute to a Roth IRA if you earning a high income (somewhere above 4,000 if single) or 6,000 if married filing jointly), but you can still keep it and let it grow tax-deferred. In 2010, the tax law changes where any working citizen can open it, no matter how much income you make.

      If your income is above those limits I mentioned, you can open a Traditional IRA. After 2010, roll the Traditional IRA into a Roth IRA.

16. QUESTION:
    Is it better to rollover my 401k into an IRA, Roth IRA or my new employers 401k?
    I am about to leave my job for a new position. I am 24 years old and have about 5k in my 401k. Is it better for me to roll it over into an IRA, Roth IRA or into my new employers 401k program?

    • ANSWER:
      As an FA, I generally recommend an IRA rollover…more investment choices. Drawback…can’t take a loan from it but then again you really should avoid borrowing from your retirement savings.

      As for rolling to a Roth. It’s called a Roth conversion and is possible but you have to meet certain income requirements (<100K married or single) to be eligible. You will have to pay current taxes on it though.

      Good luck. feel free to email if you have any specific questions.

17. QUESTION:
    Is it safe to open a roth IRA with Vanguard online?
    I would like to open a roth IRA with Vanguard and I don’t believe that they have any offices in Pittsburgh, PA. I noticed on their web-stie that you can do it easily online but it requires a lot of sensitive information such as account and routing numbers to get money (I am planning on doing max 00) transferred/invested. Can someone assure me that this is normal and safe and that I can set it up online.

    Much appreciated!

    • ANSWER:
      In general it is safe to do this online. You might possibly have a problem if you have a key-logging virus on your computer. If you don’t want to do it online, you can download forms from their website, and mail them in.

18. QUESTION:
    When I change my IRA to a ROTH IRA can I pay the taxes from the IRA?
    I am retired and want to change my ira to a roth ira so I don’t have to worry about future taxes from the roth ira.
    what are the rules of the roth ira?

    • ANSWER:
      It the same rules as for an IRA. The difference is on the withdrawal. Roth’s you have already paid them and for a standard IRA you have not. So on each payment from an IRA you will owe taxes. On a Roth each payment will be tax exempt.

      Yes, you can have them withhold the taxes from the amount being rolled over. Just tell them what percentage to withhold (min 10%).

      Not sure why you want to pay a lump sum to the IRS at this point? Are you expecting large gains from the market????

19. QUESTION:
    What is the difference between a Roth IRA/IRA and mutual funds?
    Isn’t an IRA or Roth IRA just a bunch of mutual funds or should I go to Investing 101?
    Thanks.

    • ANSWER:
      Yep, you’re Investing 101 material and so are a million other people! The good news is that you are smart enough to ask the right question. An IRA ***of any kind*** is nothing but a retirement account designed to defer earned and unearned income until you are eligible to make withdrawals. In other words, it’s an empty shell until you put something in it. So, what can you put into an IRA? The average investor invests in stocks, bonds and mutual funds. The majority of wage earners invest in funds. More experienced investors buy stocks, bonds, options contracts and real estate in theirs. Check out the IRS website for complete information on this subject.

      Mutual funds are investment companies that buy stocks and bonds with the objective of making a profit. You can invest in a mutual fund with money that is deposited in an IRA or in a regular taxable account. If the fund is not sheltered in a retirement account, the income and capital gains are subject to personal taxes during the year when the gains took place. The IRA protects your gains from being taxed. You pay taxes on any income you receive, starting at age 59 1/2.

      Hawk

20. QUESTION:
    In my case, can I take the owed taxes from the Roth IRA to pay the taxes due without incurring penalties, etc?
    I converted a Traditional IRA to a Roth IRA. The federal taxes were withheld – all is well with that (I think). The state taxes were not withheld. Now I owe the state a bunch of money. Can I take the owed amount (or less) from the Roth IRA to pay the taxes due without incurring penalties, etc? Would this be considered a “premature withdrawal”?

    • ANSWER:
      Yes, if you are over age 59 1/2.

      If you are under age 59 1/2, the answer is more complicated.

      If you had previous regular annual contributions in your Roth IRA that you have not yet been withdrawn, then you can withdraw them at any time for any reason without penalty.

      However, if the only contributions to your Roth IRA came from the conversion, then you have to wait at least 5 years or until you turn 59 1/2 (whichever comes first) to take a penalty-free withdrawal. If you withdraw part of the converted amount (for any reason) it will be subject to the 10% penalty, but not to income taxes, until after the 5-year waiting period has passed.

      From an investment standpoint, it is almost always a bad idea to take money out of your IRA to pay taxes. It is also a bad idea to have taxes withheld from a conversion. It is a better idea to convert a smaller amount that you can afford to pay taxes on with outside money.

      The problem is that the amount withheld for taxes will be treated as a distribution from your IRA and be subject to both income taxes and the 10% penalty if you are under 59 1/2. (Yes, you have to pay taxes on the amount taken out for taxes!) And it will reduce the amount of money growing in your IRA.

      Another person suggested undoing the conversion. This is possible. But, unfortunately, since you had part of the conversion withheld for taxes, you cannot undo the withholding. For example, if you converted 00, but had 0 withheld for taxes, that means you really only converted 0 and can only “unconvert” the 0. If it has been less than 60 days, you could replace the taxes with money out of your own pocket. But if it has been more than 60 days, you are out of luck.

21. QUESTION:
    Foreign earned income exclusion and Traditional IRA to Roth IRA conversion taxes/ capital gains?
    I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
    Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?

    • ANSWER:
      If you are do going to do an IRA to Roth IRA conversion, the tax for the conversion is best paid from some other source, instead of withholding from the conversion. For example if they wihhold 20% towards tax and do not add that missing 20% back in with the conversion (within 60 days), there would be a 10% penalty on that 20% withheld (because the withholding would be considered an IRA distribution).

22. QUESTION:
    Does transferring a Roth IRA to another institution impact the five year rule for qualified distributions?
    If I transfer a Roth IRA from one financial institution to another, will the five year waiting period for tax-free qualified distributions be impacted, or will it still be calculated from the date I first contributed to the IRA at the original institution?

    • ANSWER:
      it would be better if you let the institutions transfer the money between them so that you do not have constructive receipt of the money

23. QUESTION:
    Can I have a Roth IRA and open a SEP-IRA for my business?
    I own my own business (its a C Corp) and I have a Roth IRA from a previous job. I would like to open a SEP-IRA for my business (no other employees yet). I want to put my paycheck in the SEP. (Ithink I can deposit K/yr tax free into a SEP.) Can I have two retirement accounts?

    • ANSWER:
      Yes you can have a Roth and a SEP. Because you’re a C-Corp and not considered self-employed you can’t put 45k in the SEP (2007 number, it’s 44 in 2006) unless you make(made) over 180k. SEP contributions are limited to 25% of your income. And, if you made that much then you can’t contribute to the ROTH as you exceed the income limitation for that.

      If you anticipate making less than 180k in w-2 wages then you should consider a solo-401k. To maximize your contribution in that plan you only need to make 118,000.

      And, if you do make over the 180k and are over age 50 then you should STILL consider a 401k as you can get 50k into one of those.

      Also, if you anticipate having employees then definately a 401k….you don’t have to put nearly as much in for them in that vehicle.

      Lastly, it’s not tax free…it’s tax deferred.

24. QUESTION:
    What’s the 2008 contribution limit for Roth 401k and Roth IRA combined?
    Like the question asks what is the combined total limit for the Roth 401k and the Roth IRA? I’ve read too much conflicting information that you can contribute the full 5k in the Roth IRA and 14k in the Roth 401K? Then I’ve checked with financial advisors and they indicate otherswise. Hm, please CITE sources with your response, need accurate information.

    Lastly, if anyone know what the combined limit between the Roth401k, Roth IRA and the traditional 401k also list it as well.

    Thanks!
    Can Icontribute to all three: Roth 401k, 401k and the Roth IRA?

    I know you can do the last two but what about all three?

    I am of course referring to just partial amounts so I don’t exceed the 15k annual limit and the as far as I know the 5k limit for the Roth IRA is considered separate. Thanks!
    Forgot to mention within the Roth IRA AGI limits and under the age of 50.

    • ANSWER:
      The 2008 limit for a 401k is ,500. If you’re 50 or older in 2008, you can contribute an additional ,000.

      The 2008 limit for IRAs is ,000. If you’re 50 or older on 2008, it’s ,000. However, your ability to contribute to a Roth IRA is reduced or eliminated if your modified adjusted gross income exceeds a certain amount. The amount depends on your filing status. See IRS Publication 17 for details. You can download it from www.irs.gov.

      The combined limit is the individual limits added together (,500 or ,500 depending on your age and subject to adjustment if have a Roth IRA and your modified AGI exceeds the limit).

      The limits apply regardless of whether the account is a Roth, traditional, or if you put some money in one of each. For example, let’s say that you want to fully fund your IRA, you’re under 50, and your modified AGI is less than the limit for a Roth IRA. You can put ,000 in a traditional IRA. You can put ,000 in a Roth IRA. Or, you can put some in both accounts as long as the total contributions to both accounts combined does not exceed ,000.

25. QUESTION:
    I want to rollover my traditional ira to a Roth ira verses?
    I only have 00 in traditional, and want to roll it over now because i’m taxed in the 15% tax range. And when i but it in a roth ira, it’ll be tax free when i take it out when i retire. Verses the traditional ira, which would be taxed at a higher rate when i retire in 20 years, ( that is if i’m in a higher tax braket). Does this sound like a smart thing to do?

    • ANSWER:
      I use the rule that if I’m in a 15% tax bracket or less, I move IRA money…if I’m in the 25% bracket, I don’t.

      I’ve seen many retirees have *higher* tax rates in retirement than they do in the years before….

26. QUESTION:
    How do I declare roth IRA contribution for taxes?
    I contributed ,000 to my roth IRA in 2008. How do I declare this when filing taxes? My company has not provided any 1099 or other document, are they supposed to? I plan to file my taxes using Turbo Tax, how/where should I declare the contribution?
    Awesome, thanks for the answers. I knew it wasn’t tax deductible, I just thought I had to declare the contribution as income. Thanks all for the clarification.

    • ANSWER:
      The Roth IRA does not give you a tax deduction for the year you contribute. It is made with “after tax” dollars. That’s the bad news.

      The good news is it isn’t taxed (hopefully still won’t when you retire) when you take the money out.

      Either way, you don’t put it anywhere on the Form 1040.

27. QUESTION:
    When calculating income for Roth IRA eligibility, do capital gains count toward the total?
    I know about the 99k-114k phaseout for single filers in 2007. So for example, if you made 90k in salary and had 25k in capital gains would you be able to contribute to a Roth IRA?

    • ANSWER:
      capital gains do count

      see IRS Pub 590 for the details of how to modify AGI for this calculation

      http://www.irs.gov/publications/p590/ch02.html#d0e9254

28. QUESTION:
    Is it possible to change a Roth IRA to a traditional IRA?
    I am young, and I know most financial advisors/calculators out there tell you I would stand to benefit from being in a ROTH IRA. However, after researching this, I know longer believe there’s any guarantee the gov’t will keep the policy of not taxing my returns when I retire 30 years from now. I’d rather take the tax benefit now. Your thoughts?

    • ANSWER:
      If you contributed the money into the Roth this year (2007) you can do what is called a “recharacterization.” The company you invest with will have a form to fill out. The only thing is, you can recharacterize THIS year’s contribution back to the traditional IRA, but any contributions you made to a Roth in prior years cannot be recharacterized.

29. QUESTION:
    How do I calculate taxes when converting a Traditional IRA with TIPS to a Roth IRA?
    I have a traditional IRA which contains TIPS (treasury inflated protected securities). How do I calculate taxes when converting the IRA to a Roth IRA?

    • ANSWER:
      TIPS has nothing to do with it. You are converting dollars put away before paying taxes to dollars put away after you pay taxes. Figure out your tax rate and multiply by the amount in the IRA. Can get gruesome. Why convert??? Your tax impact should be less when you retire and you withdraw your money at 70 and 1/2.

30. QUESTION:
    How do I invest my money in a Roth IRA?
    A friend told me that I should put my money in a Roth IRA for my future investments and retirement. I don’t know much about it and/or how to put my money into one but I am curious. I am a 17 year old emancipated minor in California who has a bank account already and a job.

    Thanks for all the help in telling me what a Roth IRA is and how to put my money in one (if I even should) in advance.

    • ANSWER:
      I think that it is great you are thinking about your future finances and retirment. It is never too early. Just make sure that any money you put in an investment is disposable cash, meaning you are willing to live without it.

      I think your friend is right. The sooner you start, the better because the money compounds over time. Basically, a Roth IRA is a tax deferred earning account. You can open an IRA account any where. It just depends where you want to invest it in. For example, I use my IRA to invest in stocks. So I open the account with E-trade to buy shares of the company I am interested in.

      You can use your IRA money in CD’s, Bonds, Mutual Funds, or whatever you want. Just know you are capped at the limit of K this year.

      Good luck

31. QUESTION:
    Where is the best place to open a ROTH IRA?
    I’m 26.. I have 000 in savings, 00 in 401K and no credit card debt. I have a car loan 000 which I intend to keep open just to keep a good credit history.

    My problem is, I’m not really good with investing and I know very little with the investing lingo. Is Roth IRA the right way to go? If so, which brokerage company should I open it with? Also, any other tips regarding retirement planning.

    • ANSWER:
      As long as you understand that you cannot take out the money until age 59-1/2 without huge penalties then a Roth is a good choice. My favorite mutual fund company is American Century Investors. They have a wide variety of funds and great customer service. Vanguard is good as well, but their customer service isn’t that great (that is what you give up to get their lower fees).

32. QUESTION:
    How does a Roth IRA get reported on my taxes?
    I contributed about 0 to my Roth IRA in 2006. I don’t get taxed on that do I? I heard I get a refund for 15% of that or something. Can someone please clear that up for me. Also, if it matters, I’m self-employed.

    Thanks!

    • ANSWER:
      Roth IRA deposits are fully taxed — you don’t get a deduction for it — but they accumulate tax free. You don’t need to record this on your taxes.

33. QUESTION:
    I am a college student, can I open roth IRA and start contributing?
    I am a dependent in my twenties, studing in a community college. I am employed as a tutor in my CC. Can I start saving for my retirement? does ROTH IRA work for me? or is there a better option?

    P.S. I can contribute 0 each month. Is that too little to qualify for a roth IRA?

    P.S. also, will participate in a roth IRA affect my status to receive financial aid from government?

    • ANSWER:
      You can contribute to an IRA as long as you have “earned income” from some type of job and later get a W-2 or 1099-MISC (certain types) for it.

      In my opinion, a ROTH IRA is the best type of IRA that there is! It does not allow you to deduct it against your income each year (so you don’t immediately save on taxes), but you also DON’T pay taxes when you take money out of it in retirement!

      In 2008 you can contribute up to ,000 for the year into this IRA. 0 per month is almost that full amount! But if you only earn, say, ,000 at your job(s), then you can only put up to that same amount (,000, or whatever you earn under the ,000 limit) into the IRA. In other words, you can only contribute up to how much you’ve earned for the year at your job(s).

      I have not heard that having an IRA hurts your chances to receive financial aid, but try researching and asking the financial aid people that question before opening the IRA!

      I highly recommend Vanguard (www.vanguard.com –> click on “Personal Investors”) for the investment choices to put in that IRA account (safe or riskier — either way)! They are AWESOME, and have such high-quality products — and very little or no fees!

      Hope this all helps!

34. QUESTION:
    What are the total contributions allowed for IRA, Roth IRA and 401k?
    1. What are the total contributions allowed per year for each – IRA, Roth IRA and 401k? assuming the person is in his early 30′s.

    2. Let’s say this individual wants to retire in his mid-50′s, which funds can be withdrawn out of the 3, without any penalties?

    3. Finally, can this person also get his Social Security income when he reaches in his 60′s, while still living on his IRA, Roth IRA and 401K savings? can all 4 be an income source for this individual?

    Many thanks!

    • ANSWER:
      Contributions are tiered by age ,
      Ask your plan administrator .

      All those have penalties for withdrawals before age 60 .

      Social security begins at 66 for current retires ,
      But is more like 70 for people born in your year .
      Currently , social security is Not reduced for other retirement income but there is talk of changing that .

      >

35. QUESTION:
    How much I am allowed to contribute to my ROTH IRA as a married couple?
    My husband and I currently have one ROTH IRA under my name.
    I also have 401k at my job, and he has his 401 at his job.
    I am wondering could he also contribute to an ROTH IRA?
    If so, what is the limits for him?

    • ANSWER:
      Depending on your age. If you are over 50, then you can contribute 00 each as long as you have made at least ,0000 in income. If you are under 50, then the max is ,000 each.

      Now if you make more than 166,000 as a couple, then those limits are less.

      If you do make over 6,000 then I would make a trad ira contr and then convert to a roth.

      If you do make over 6,000 I would always talk with a tax advisor on anything that you do, especially when it comes to roths.

36. QUESTION:
    Is it smart to use my Roth IRA towards my morgage?
    I have a nice down payment I’m putting on my first house, but wondered would it be smart to add in money from my Roth IRA? What is better in the long run. As of now I am planning on living in this house for a long period of time, but everyone knows that can change.

    • ANSWER:
      I wouldn’t if I were you…

      If you already have a down payment on your house, I’d keep your investments for any unforeseeable need in the future. I understand you want to live in this house for a long time, and you will presumably allow the equity to grow, however with the mortgage industry as bad off as it is now, property values may continue to fall and in 5 years you have something come up and you try to take a HELOC (home equity line of credit) on your house or refinance it, you might find it isn’t worth what you paid for it.

      Keep the IRA safe, it isn’t hurting anyone where it is right now.

      -Em

37. QUESTION:
    Is tax on an IRA distribution that is converted to a Roth considered unearned income?
    Last tax year 2009, I chose to convert 00 of my kids Traditional IRA to his Roth IRA. I understand that the 00 will be taxable to him. However, is the taxable amount considered unearned income to him and now subject to”Kiddy Tax” ?

    • ANSWER:
      Yes, it’s unearned income and subject to kiddie tax.

      If it’s not on a w-2, it’s kiddie tax–that also includes IRAs, unemployment, etc.

      He will have to file a form 1040 with an 8615 attached.

38. QUESTION:
    Can you find a skeptical article on Roth IRA vs Traditional IRA?
    Most published articles paint a very favorable picture of Roth IRA versus the Traditional IRA (and other IRA-like plans). I have done my own analysis and I honestly think the Roth is a clever government scheme to collect more taxes, and under no circumstances have I been able to think up a scenario where the individual taxpayer/investor comes out ahead with a Roth. Can you point out any well-written article that supports my opinion?

    Thanks
    I am not looking to debate my findings. I just want to find people who agree.

    • ANSWER:
      It might help if you post the analysis you did proving your theory.

39. QUESTION:
    Should I close my Roth IRA and will I face a penalty?
    My wife’s parents opened a Roth IRA for her prior to us getting married. It has been opened around six months now. We are considering closing it to pay off her credit card and getting entirely debt free. Is there any sort of exception to the additional taxing on nonqualified disbursements that would apply to this situation? We have other investments in place, and this Roth IRA is really unnecessary. Any help would be greatly appreciated. Thanks.

    • ANSWER:
      What? It grows tax free! Why would you withdraw it now to pay a 10% penalty and get taxed on the growth? Keep it until retirement and enjoy your untaxed free money!

40. QUESTION:
    Why is there an upper income limit for contributing to a Roth IRA?
    People over a certain income are not allowed to make any contributions to a Roth IRA. Why? Wouldn’t people with high income rather pay the taxes later anyway (as they would do with a traditional IRA)? In other words, doesn’t this rule just prohibit people from doing something they’d already rather not do?
    Mrs. F: in addition to the upper income limit, there’s also a yearly contribution limit (00 this year). But Roth IRAs are still very, very, worth it! You can always put more money in next year, and the year after that, etc. Contribute the maximum, or as much as you can, every year; you’ll be glad later.

    • ANSWER:
      The limits are for AGI over 0,000 if married (MFJ) and 0,000 for single folks. I would assume that the idea of having a limit is to give tax breaks to lower income folks and continue to tax the “rich”. All of this a political decision by Congress not the IRS.

41. QUESTION:
    What are the tax implications for Canadians for 401k and ROTH IRA at retirement?
    How do taxes work when Canadians who may have worked in the US withdraw money from their 401k or ROTH IRAs at retirement? Someone told me that a 401k can be withdrawn (and taxed in the US), but when the money is taken to Canada it will not be additionally taxed. However, the ROTH IRA would be taxed as new income in Canada. Is this true? If so, this defeats the whole purpose of the tax free growth provided by the ROTH IRA.

    I am currently working in the US but am a Canadian Citizen and hence dont really know where i will be come retirement (40 years away) so I am not sure as to where I should invest. I am trying to collect details so I can make an informed decision.

    Thanks
    Mathew, I know how the taxes work if you remain in the US. I need to find how they work if you plan to take the money to Canada. Of course I dont know how things will work in 40 years, but how do they work now?

    • ANSWER:
      For US taxes the 401 k disbursements will be taxed at your tax rate when you retire and the Roth disbursements will be tax free. Who knows what the Canadian tax rules will be in 40 years.

42. QUESTION:
    Can I contribute to individual roth ira and 401k roth ira at the same time ?
    I’ve contributed the maximum allowed for the 401k roth ira (500). Can I contribute another (00-00?) to an individual roth ira account? Or any other individual ira account in the same year?

    • ANSWER:
      The short answer is yes, you can still contribute to individual Roth and Traditional IRAs. However, when you are covered by your employers retirement plan there are limits to how much you can contribute. The limite is dependent on your modified adjusted gross income and your age.

      See IRS document Publication 590, page 14 for explanation. http://www.irs.gov/pub/irs-pdf/p590.pdf

      If you have a spouse who makes less or no income, you may also save money (and reduce your taxes) by opening an IRA for your spouse.

      Best wishes.

43. QUESTION:
    Does how much you contribute into a roth IRA, take that much away from your taxible income?
    For example if I contribute 00 into a roth IRA, and had a taxable income of ,000 would it now be ,000 of taxible income?

    • ANSWER:
      A traditional IRA will do what you are looking for. A Roth is taxed up-front, but you are not taxed on the back end when you withdrawal the money.

44. QUESTION:
    Where is the best place to put Roth IRA money with objective of preserving capital?
    Regarding a Roth IRA investment; does buying a Tax Exempt Bond make sense over a Taxable Bond Fund? At this time, which is better; Short, Long, or Intermediate Term? Do you have any specific recommendations within the Vanguard family of funds? Right now everything is in a money market fund. Thanks in advance.

    • ANSWER:
      The obvious but perhaps incorrect answer is a money market fund. It is obvious because generally speaking the fund is liquid, but there is a chance that the some of the assets of the fund might fail. Another obvious answer is CDs and T-bills. Both are guaranteed by the U S government, but there is a big catch. Inflation and the value of the dollar. As you have been informed munis make zero sense in a tax free Roth IRA.

      To preserve your capital, you actually have to take some risks. That is just life, I guess. Inflation is running at about 5% annually, maybe even more. The government lies about the inflation rate so do not believe their figures. In addition to that the U S dollar is loosing value at about 5% annually, so investing in T-bills or CDs are eroding your capital at about a 5% annual clip.

      Vanguard does have a very good mutual fund that might be a good vehicle for presrving your capital. The Global Equity Fund. VHGEX. Currently only 35% of its investments are in U S dollar securities so you are somewhat protected against a drop in the value of the dollar and a 10 year annual return of better than 12%. However, it is never a wise strategy to count on just one investment to safeguard your assets or to grow your assets.

      My thought is that one can not go too wrong investing in energy investments and Vanguard has a find one. VGENX. It has a 10 year annual return of about 16%. 44% of this fund is in non-dollar investments.

      As the dollar sinks in value, that is actually good news for some U S companies. Those being the mega-internationals that considerable business overseas such as Boeing and Catapiller and Microsoft and IBM. So an investment in a fund that has a large holding of these type companies also might prove worthwhile. VAAPX is such a fund. Also VLACX.

45. QUESTION:
    What do you do when you make Roth IRA contributions for a year in which your annual income exceeds the limits?
    Let’s say a couple made Roth IRA contributions for 2005 in Feb 2005. In 2006, they realized that their 2005 income was much higher than they originally expected and exceeded the 0K limit for couples. What are the options available now to undo it?

    • ANSWER:
      You better talk to a tax person. If you’ve filed already, and took the deduction, then you’ll have to amend. But if you went to file and realized your mistake, they can help you back out your money.

46. QUESTION:
    How do I go about getting a Roth IRA started?
    I’m 23, married, and interested in opening a roth IRA but I have no idea where to go, what bank to use or what my options are. I’ve done my research and know that this is the type of account I want but haven’t been able to find advice on how to get the ball rolling. Any advice or suggestion would be appreciated =)
    Also, what is the minimum amount to open the account?

    • ANSWER:
      You can open a Roth IRA at any bank or brokerage firm in the country. You could invest the money in a CD or a Mutual Fund. You can think of the Roth IRA as a kind of wrapper around an investment that shields the investment from income taxes.

      The larger brokerage companies will allow you to open your account online. Some accounts have no costs other than the mutual fund management fees. Others charge an annual fee, on top of the management fees, of – or so. A three of the larger mutual fund houses that offer Roth IRAs are:

      Fidelity:

      http://personal.fidelity.com/products/retirement/getstart/open_nofee_ira.shtml.cvsr

      Vanguard:

      https://personal.vanguard.com/us/accounttypes/retirement/ATSStartSavingRetVGIIRAContent.jsp

      T Rowe Price:

      https://www3.troweprice.com/nmf/NMFWeb/pubOpenNewAccount.nmf?path=open&src=iramicro

      If you’d like to read more about Roth IRAs, here is a link to an article on how to start a Roth IRA

      http://www.getrichslowly.org/blog/2007/06/07/how-to-start-a-roth-ira-and-where-to-do-it/

      I hope that helps.

47. QUESTION:
    What to do with the capital gain from the excess roth IRA contribtution?
    I overcontributed 00 to my roth IRA for 2006. This contribution has made some capital gain. I understand that I need to file a IRA distribution to take out the excess contribution to avoid IRA penalty. However, what should I do with the gain from the excess contribution?

    Thanks,

    • ANSWER:
      Earnings on the excess will be considered as received in the year the contribution was made, and are taxable for that year, plus the 10% penalty (assuming you are under 59 1/2).

      You can possibly avoid the excise tax if you more the excess Roth contribution and the earnings on the excess either by transferring to a regular IRA (trustee-to- trustee) before the deadline for the year in which the contribution is made.

      I would probably suggest contacting your IRA broker to see if they can help you out and offer any alternatives.

48. QUESTION:
    Im looking ot opena Roth IRA but i need help figuring out where to start?
    Im only 16, and with my parents approval i have decided t open a Roth IRA. I have no idea where to start, if some one could list the basic steps in order of what i would need to do. Also where should i open one, i did some research at the ing website but it was pretty confusing.

    • ANSWER:
      First, do you have any earned income? There is no age limit for opening a Roth IRA, but you need to have earned wages or received money as an independent contractor, for example.

      If you have earned income, then you may open a Roth IRA at just about any bank, credit union, or brokerage (such as Vanguard). The amount you can contribute depends on how much earned income you have. If you only earned ,000 in any one year, then the maximum you can contribute is ,000. If you earned at least ,000 in 2007, you can contribute up to ,000 in a Roth IRA, but you only have until tomorrow’s April 15 deadline to make a Roth IRA contribution for the tax year 2007.
      If you earn at least ,000 in 2008, you may contribute any amount up to ,000 to your Roth IRA for the 2008 tax year. If you earn less than ,000 in 2008, you may contribute any amount up to your total earned income in 2008.
      For someone your age, a discount brokerage such as Vanguard would be a great place to start. I’m sure that others may recommend other good brokerages. I have always used Vanguard.
      However, if you have less than ,000 to invest, then you might have to open your Roth IRA at a credit union, where they are willing to accept smaller contributions. And, many credit unions do not charge fees for IRAs.
      Good luck to you! By starting early, you will have the most to gain. Congratulations! A few hundred dollars invested at your age could easily be worth tens of thousands of dollars in the future.

      By the way, there is no tax deduction for making a Roth IRA contribution. You contribute with post-tax dollars (that means you already paid your taxes on the dollars you contribute). But, if you play by the rules, all the earnings on your Roth IRA will be tax free when you begin making qualified withdrawals. By the time you retire, most of the money in your Roth IRA will be from earnings.

49. QUESTION:
    What’s the difference between ROTH IRA and Traditional IRA?
    Can I take money out of ROTH IRA anytime I want without paying tax?

    • ANSWER:
      The main difference is in how they are taxed. Contributions to a traditional IRA are tax deductible in the year you contribute, but you pay tax on withdrawals you make in the future. With a Roth IRA, your contributions are not tax deductible, but any withdrawals you make after age 59 1/2, including capital gains, will be totally TAX-FREE!! Unless you currently have a very high income, the Roth is a better choice.

      You can withdraw up to the amount you contributed to a Roth IRA anytime without paying tax (because you already paid tax on that), but you will have to pay tax (plus a 10% penalty, I believe) on any profits you withdraw before age 59 1/2.

50. QUESTION:
    How many funds can you choose with funding an Roth IRA?
    Im funding my new Roth IRA, and im wondering how many funds you can choose to fun the IRA with. Does it work like a 401k where you may choose mulitple, or do you have to choose 1?
    Ex:
    Can I choose to fund my Roth IRA with many various different kind of funds like: Fidelity Freedom 2040, , Mutual funds, T-Bonds & Notes and stocks?

    • ANSWER:
      Depends on who you set up the IRA with. If you set it up with a stock brokerage firm, you can set it up with as many mutual funds as you like. If you set it up with a mutual fund you may only be able to use their family of funds. Which may be pretty substantial.