401k
401k Information

Roth Ira Rates

Most have the choice of converting from a traditional IRA to a Roth IRA. This decision is based on various factors and could provide a huge financial boon over the long run given the right parameters – tens of thousands in most cases. For most people, a Roth IRA conversion is beneficial, but there may be circumstances when this financial move can be detrimental. Knowing how it affects you is the key.

Roth IRAs are available to people below a certain income limit. This fact may prevent some workers from being eligible. Current tax brackets also play a large role in making this decision. It is best to carefully weigh all the pros and cons before making this decision.

To make an informed decision, individuals must familiarize themselves with Roth IRA rules. First, the individual must determine if they are eligible to convert their regular IRA to Roth. One of the main determining factors is current income. If an individual has a single tax filing income of less than 0,000 annually, they can make the conversion. If the individuals’ tax status is married and filing separately they will not be able to make the conversion. This rule does not apply if the spouses have lived apart for the entire tax year. If the money being converted was acquired from another person’s traditional IRA, it cannot be converted to a Roth fund. Keep in mind that the entire amount of the traditional IRA must be converted. It is not possible to only convert non-taxable amounts. There is one thing to consider when making the conversion. If you have concerns about the amount of money you earn during the year, the limit will no longer apply in the year 2010. If this is a main point in the decision making, it may be best to wait till 2010 and make the conversion. Then there will be no worries regarding the Roth IRA limits.

Income Tax Brackets

An important thing to remember is that all traditional IRAs that are converted to Roth will be taxed. The entire amount that is transferred from the account will be considered income and will be taxed accordingly. This is where the tax bracket comes into play. Individuals should be aware of their current bracket. This will help them determine the amount of taxes that will be due when the IRA is converted. This is one of the major considerations. Converting to a Roth IRA will save you money in the long run, especially if your tax bracket is likely to change. The amount of taxes that are required to be paid can be a substantial amount, but the benefits of the conversion will outweigh this tax. After the conversion is complete, your new Roth IRA will be a great source of non-taxable income in the future. Keep in mind that if you have two IRA accounts, it is not required that they both be converted. It is possible to only convert one, leaving one traditional IRA and one Roth IRA.

Tax brackets will play a large role in the decision making. Investors should try to estimate what their tax bracket will be when they are ready to withdraw from the IRA. If your tax bracket will be lower upon retirement, making a conversion will probably not be beneficial. This is because the amount that will be required in tax payments upon the conversion will be at a higher rate than when the money is withdrawn after retirement. However, if a higher tax bracket is predicted, it would be beneficial to proceed with the conversion. An additional factor to consider is the tax rates in the future. With the government’s new deficits, what are the chances that the tax rates will increase? Many experts believe it is necessary for them to increase in the future. IRA withdrawal rules differ between traditional and Roth accounts. To ensure a tax-free income, a Roth IRA is the better choice between the two choices. There may be other retirement options to choose from as well. If the individual will be in a low tax bracket, a traditional account could remain the better option. The amount of taxes paid to make the conversion versus the amount of taxes paid upon traditional withdrawal should be compared. This is one of the major factors in making the conversion decision.

Frequently Asked Questions

  1. QUESTION:
    Where can I find the best Roth IRA rates?
    My current Roth IRA only accumulates 2.5% interest. Where can I get better? Highest rate return gets 10pts!!!! :D
    I’m not sure if what I’m asking will make sense, but I’m looking for the kind of risk I’d normally expect from a good mutual fund, something I can manage myself — ultimately, I want to protect my 10K from being counted against me when I apply for financial aid so I may go back to school…. I understand a Roth might help with that… THANKS!

    • ANSWER:
      You didn’t specify the type of investment you have currently in your IRA portfolio. You need to be more specific on whether you’re willing to take on more risk. From here you’ll be able to find the type of investment you’re willing to invest (mutual fund, bonds, stocks, etc.) and then extrapolate the historical return you should be receiving.

      I have Vanguard Roth IRA diversified into 80% VTSMX (Vanguard Total Stock Market Index) and 20% VGTSX (Vanguard Total International Stock Index) and the theoretical long term return is about 10.5%

      My return from VGTSX (Vanguard Total International Stock Market Index) recently has returned close to 20%, but that is out of the ordinary and not expected sustainable over the long term. You should not chase recent short term return, but instead focus on the long term.

  2. QUESTION:
    individual stock account vs IRA and Roth IRA (tax rates).?
    I have a stock account and am looking for the best way to make the most of my return (after tax). If I make 10% return this year (let’s say 0) . How much would I have to pay in taxes (what is the rate)? If I converted that account into an IRA or Roth IRA or some other account (can I do that?)…how much would I have to contribute monthly and how much tax would I have to pay at the end of the year (on that return)? If I cashed in early on those IRAs (sold some of the stock and took the cash and bought, let’s say, an apartment), what penalty rate would be applied to that withdrawal?

    This basically boils down into: Is it better to hold stock in a regular (i.e non IRA etc) account (so I can withdraw $ whenever I need to) and pay tax on that, or hold it in an IRA (or other type) account and then pay the penalty, if I need to withdraw?. Any advice is appreciated. Thanks!

    • ANSWER:
      You don’t get the privilege of paying taxes on a stock gain until you sell the stock, and when you do, your tax will depend on your tax bracket.

      Technically speaking, capital gains are the final dollars in your income, meaning they enjoy the highest tax, while your ordinary income is taxed at the lower brackets.

      On the other hand, your IRA benefits will depend on how much you make, too, because of the extra “saver’s credit”. You can take up to a certain amount out of your taxable income, but you get the bonus of 0%, 10%, 20% or 50% credit in addition depending on your income and marital status.

      So you’ll have to give us a little more information to be more specific.

  3. QUESTION:
    Where can I find the best rates for a Roth IRA?
    I only want to open it with a minimal amount (under 0) and contribute no more than 0 a month. Does anyone know where I could find the best rate? Thanks!

    • ANSWER:
      Start with Vanguard Mutual Funds, . They have a wide variety of funds to suit your taste (costs, flavors & past returns). Roth IRAs are a good choice.

  4. QUESTION:
    Vanguard Roth IRA growth rates?
    I am new to this and would like to know what is the average annual growth rate for a Roth IRA amongst competitive investment banks? What is a reasonable growth rate to expect?
    What percent interest do they pay?

    • ANSWER:
      Roth IRAs are like any investment – the growth depends on the investment. No one can provide the data you are looking for since no one knows what you would be investing in. For example, a growth fund will appreciate/depreciate faster than an income fund (different target investments), while a tech fund will grow/decline differently than an energy fund.

      One does not just walk into an investment house and say put my money in an IRA…you need to tell them exactly how to invest that money based upon your risk tolerance, your length of time until withdrawal (the longer the time, the more aggressive you can be), etc.

  5. QUESTION:
    top ira rates. traditional or roth ira?
    trying to find the best rates for an ira account

    • ANSWER:
      Depends what you invest it in, not the type of account.

  6. QUESTION:
    What are the rates for ROTH IRA’s? Do they vary from company 2 company? Are they federally regulated? Help!
    I have found that the rate at my bank is 1.71% which isn’t all that hot. I want to know if Fidelity or Vanguard or someone else offers a higher rate. Or, if they are regulated, what is the rate? Thanks to all in advance.

    • ANSWER:
      A Roth IRA is an Individual Retirement Account that provides tax-free growth. A Roth account can be opened through a stockbroker, mutual fund, or other provider of “normal” investment accounts. The rates vary depending on what the investments are in. 1.71% is low. The rates aren’t regulated by the government but rather the market. You will need to do research as far as finding a better rate, also they fluctuate and you’ll want to keep that in mind. You may want to look at how a Roth has been doing over several years because of this fact. The best person to do the research is YOU (since no one will care about your money like you.)

  7. QUESTION:
    Does the interest rates on Roth IRAs differ based on where you establish them?
    I would like to open a Roth IRA. Do the interest rates or rates of return differ between Vanguard, Fidelity, my personal bank, etc. just as the interest on a savings account a different banks would differ? If so, do these rates fluctuate daily? Does anyone know whose rates are consistently higher? Can I have more than one Roth? Can I have a Roth AND a Traditional IRA?

    • ANSWER:
      Your rate of return will depend more on what funds you decide to invest in rather than what company you decide to invest with. Most mutual funds have different investment objectives to match individual investor’s unique goals. How you allocate your funds between asset classes (stocks, bonds, cash, etc.) will determine your potential return. Also, your investment time horizon (how long before you use the money) will also factor into your potential rate of return.

      You can have as many Roth IRAs as you want but you cannot contribute more than the maximum ,000 a year collectively.

      You can also have a traditional IRA and a Roth but you still are limited to the ,000 maximum combined. For example, you could contribute ,000 to each IRA but not ,000 to each.

  8. QUESTION:
    What all is involved in a ROTH IRA? How much money do i need down? What rates are included? Anything you know!
    When I finally start my new career as a nurse I want to get rid of my 5,000 dollar debt and also invest! I want to have a great retirement! I have been interested in a ROTH IRA and wanted to know more about it!

    • ANSWER:
      The first misconception a lot of people have is that ROTH IRA is an investment. It isn’t. It is an account registration for tax purposes. The types of investments you can possess in a ROTH IRA are nearly limitless. It can be applied to the savings account at your bank or individuals stock or bonds. They can all be held in a ROTH registered account.

      For small investors like myself, make sure you can take of you and your family’s (if you have one) needs first. Try to have a couple months wages of saving first for the what if’s (car repairs, sickness). Make sure your adequately insured. Then consider investing.

      If you are rather young and are focused on retirement, then I strongly recommend walking through some retirement tutorials at some major mutual fund companies. They have done a lot of work to help new investors understand the market, risk, returns, and investment options that will fit your risk tolerance. Consider one of these major mutual fund companies:
      Fidelity
      T. Rowe Price
      Vanguard

      You will find a link for retirement or retirement guidance on each of these companies web sites.

      Take the time to educate yourself, and you can avoid being steered in the wrong direction by someone looking at you as his next commission.

  9. QUESTION:
    Where do I go to get the best interest rate for a Roth IRA?
    I am looking for a place to check out, so I can get the highest interest rate possible on a Roth IRA account. Please advise me on where I can start. Thanks

    • ANSWER:
      Consider the Vanguard Prime Money Market Fund with a current compound yield of ~4.7% APR. https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0030&FundIntExt=INT

      Sometimes other institutions will have a higher teaser rate, but Vanguard tends to have the highest yields I’ve found over the long run. (Vanguard money markets are not FDIC insured, however.)

      Article on teaser rates:

      http://www.marketwatch.com/news/story/banks-advertised-rates-dont-always/story.aspx?guid=%7B0A13B6E2-FFB2-4E2B-BD42-E2D1E01C52E5%7D

      ING and HSBC often have rates close to Vanguard, and most of their products are FDIC insured. Bankrate.com provides links to CD’s with high interest rates. You can check these at the following links:

      http://home.ingdirect.com/

      http://www.us.hsbc.com/1/2/3/personal/savings?code=husa

      http://www.bankrate.com/

      (If you are investing for a long period of time and are willing to accept some volatility, you should consider putting some money into no-load low-expense mutual funds. Vanguard.com has many good funds. These are not guaranteed, but over the long run produce much higher returns.)

  10. QUESTION:
    Are IRA’s roth and traditional 100% tax defered? Are there different rates of returns for IRA’s?
    Where do you purchase IRA’s, can you buy one on line? Thank you for your help and input.

    • ANSWER:
      “Tax deferred” means that you don’t pay taxes each year while the IRA is invested and grows.

      A traditional IRA is both tax deductible and tax deferred.
      If eligible, the money put in is deducted from current income, the IRA grows untouched (at whatever rate you can get!) and when you withdraw the money, it’s taxed as ordinary income.
      (Just avoid putting “non-deductible” money into an IRA.)

      A ROTH is tax deferred. You fund it with after tax dollars and then it grows untouched (again at whatever rate you can get). If you reach 59.5, both the contributions AND the earnings will be tax free.

      You purchase IRAs at banks and brokerage houses. Due to a lousy return on one IRA I have (it’s the only one that lost money this year), I’m in the process of closing it and rolling the money into another one of my IRAs.

  11. QUESTION:
    Roth IRA Rate of Return?
    My bank posts an APY of 1.11%, and dividend rate of 1.10% for Roth IRA savings accounts. What is the difference between the two? Im assuming it is compounded monthly, does that equal an expected rate of return at 13% ? That seems high, all the roth ira calculators I found use 8% in their ROR

    • ANSWER:
      Yes..that is the compound, and no, you don’t get 13% – the APR stands for Annual Percentage Yield, so you get 1.11% a year.The calculators use 8% because that is the historic yield for stocks.

  12. QUESTION:
    Roth IRA rate?
    HI
    I am thinking about investing in Roth IRA
    I dont know where to invest…I mean which bank which financial institute….does it make any difference if I choose a particular institution over other?
    is there any way by which I pick particular financial institute so that i can get the higher rate of return
    I am looking for long term and safe investment

    If that is possible,
    lets say, for now, I invest money in some abc bank and later on, can I change the portfolio?
    thanks

    • ANSWER:
      Try TradeKing.com, this where I have my Roth. Research a few funds (ie Latin America, China, SEAsia, Emerging Mkt) and growth stocks (ie VMWare, Apple, Research in Motion, Google). You can use Morningstar.com screeners to find the ones with the best sustained performance. This is what I do, and if I see good future trends I add to those positions, if I see trends breaking I ratchet out of that.

  13. QUESTION:
    What is a GOOD investment right now w/ the way interest rates are? I use to do CD’s, I already have a roth IRA?
    I have ,000 to put somewhere.

    • ANSWER:
      Although stocks may seem negative, there are many at bargain prices. I would stay away from Banks and Transportation stocks, also unless you have heavily research Biotech stocks they may be a bit tricky. It really depends on if your looking long term, however, I feel that CDs are pretty worthless as their rates barely cover inflation.

      I am starting a website called InvestmentFractions.com that will be able to earn every investor a flat 10% rate, however, it will not be fully running until mid October.

  14. QUESTION:
    what would be an average Interest rate on a Roth IRA?
    ive heard of compound interest and thought that opening a roth ira would be a good way to make some money in the long run, but can anyone tell me what an average rate on an IRA goes for now a days? ive heard of people talking about 12% or so but if its not that then how can someone accumulate interest that is more than 12%. Thank you

    • ANSWER:
      Right now it’s about 4.5 % . . . maybe you can find up to 5%.
      Using a brokerage account, you could place the funds in other investments – stocks, bonds, etc. Currently the market is “depressed”, but that means it’s the best time to buy.
      Higher risk, but potential for 20+% return per year too.

  15. QUESTION:
    BEST ROTH IRA rate!!?
    i am trying to invest in a Roth IRA, but i don’t know where to find the best interest rate on one.
    PLEASE someone help, i have no idea where to start!
    thanks :)

    • ANSWER:
      You do not understand IRAs. See here: http://www.ira.com.

  16. 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.

  17. QUESTION:
    I have a Roth IRA at my bank.. I want to have a Roth IRA at a different bank because the rates are better..
    Can I transfer the money in my roth ira to the one I want to open up with a different bank.. Even though there is like 12,000 in the roth ira i have now..

    • ANSWER:
      There are two issues in play.

      One is that it is an IRA (Roth or otherwise doesn’t matter in this situation).
      Thus, you must do a bank-to-bank transfer, not bank-you-bank, as the other answers have stated.

      The second issue is the terms of the account at the first bank.
      If the account is a CD with penalties for early withdrawal, then
      it is inadvisable to do the transfer before it matures. The penalties
      will probably outweigh the advantages of the other bank. So you
      just wait.

      On the other hand, if it is just a normal savings account, then
      you are free to transfer it any time you want, so you can go
      ahead. Start by contacting the other bank.

      .

  18. QUESTION:
    I’m looking at beginning a Roth IRA account. Where can I find out which company has the best rates of return?

    • ANSWER:
      Go to http://www.bestmoneyinfo.com for help finding which funds to invest in. It gives a list of top performing funds for the long term.

  19. QUESTION:
    Any suggestions on a good company to go with for a ROTH IRA? What is a good rate to expect?
    I’m thinking about using Bank of America. Their rates on an IRA are 2.28% with 2.3% APY OR 2.72% with 2.75% APY. Is that good for an IRA?

    • ANSWER:
      I have an account with Vanguard and have been very happy with them. The site is easy to use and they have a wide range of funds to choose from. The main thing for me is that a lot of their index funds have very low fees, which leaves more of your return to grow over time.

      I’m a little confused by the rates you’ve included. You must be looking at pretty conservative investments. Typically with a Roth IRA, you open up the account and then choose the funds you want to buy. These rates are very low and indicate a very conservative investment approach. If you were to buy a stock market index fund, which mirrors the stock market there is no guaranteed return, but over time they should be much, much higher than the rates you have listed, as long as you have a long time before you plan to retire (longer than 10 years).

      I hope this helps.

  20. QUESTION:
    What is the percentage rate of a Roth IRA and traditional IRA?
    Sorry, I kind of know what is the difference but I don’t know what percentage rate do each get. I am a noob to this.

    • ANSWER:
      There is a broad range of investment options for both ROTH ad traditional IRAs. The difference is that you pay taxes before you contribute to a ROTH IRA, with a traditional IRA, you get a deduction that means your deposit into the IRA was not taxed. At retirement you owe taxes on distributions from the traditional IRAs. However with the ROTH you already paid taxes, so the ROTH IRA distribution is tax free.

      What your earnings are will depend what you choose to invest in. For someone getting started a low-cost broad market index mutual fund is a great option.

  21. QUESTION:
    What is the tax withdrawal rate on a Roth IRA? I want to withdrawl 00.?

    I have had it for 5 years and I’m under the original contributions. 35 yrs old.

    • ANSWER:
      So many answers, some right, some wrong. If you’re under the original contributions, that is, the Roth is worth less than what you put in, your withdrawal will be tax free. In fact, you could deduct the LOSS if you liquidate your entire Roth IRA, as a miscellaneous itemized deduction, subject to a 2% of adjusted gross income floor.

      The ordering rule for Roth withdrawals is contributions first.

      Hope that nails it for you.

      On behalf of all of your responders, who take the time and effort to help questioners in this free Yahoo! community, THANK YOU in advance for taking the time to choose your “Best” Answer. We really appreciate it.

      DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

      Bradley Mann, CFP®, EA
      Certified Financial Planner Practitioner
      Enrolled Agent | Admitted to Practice before the IRS

  22. QUESTION:
    As of today which bank or financial institution is offering the best rate of to open up a Roth IRA account?
    I want to open up a Roth IRA Account, wanted to know which bank or financial institution is offering the best rate, thanks

    • ANSWER:
      A Roth IRA is a type of retirement account, in which you invest your money. The return on investment you receive depends on what you invest in. Many financial institutions charge a one-time set up fee for new Roth IRAs, and an annual fee each year thereafter. But not all do.

      Fidelity Investments has a no-fee IRA. They have a minimum initial deposit of ,500, but that’s is waived if you have 0 monthly automatic contributions.

      T. Rowe Price charges per year for a Roth IRA account. Once your balance goes above ,000, there aren’t any annual fees. The minimum to open in ,000, but they waive that if you contribute at least monthly using their Automatic Asset Builder.

  23. QUESTION:
    How and where to set up a Roth IRA?
    I am 23 years old and a recent college grad and wanted to get some info on setting up a Roth IRA. Should I do this at my bank (PNC Bank) or somewhere else. Are the rates and returns similar for anywhere I would go? What is your best advice on doing this? Good idea? Any other places to invest that would get a better return in say, 30 years or so than a Roth? Your input is appreciated.

    • ANSWER:
      Your best bet is to invest with an ” investment company”…Fidelity, T.Rowe Price, Vanguard… their main reasons for being IN BUSINESS is investing and making money grow.
      Take a few hours to look at their websites…find out what mutual funds belong in your IRA…( conservative at first?.. do you want to be aggressive for awhile?..do you want to be active or let it lay for 35 years? )
      I use Fidelity and E-trade and invest ( IRA’s ,401′s, rollovers, for myself, wife, daughters, and a couple of friends) and what I have learned is: I should have known about this approach when I was younger!!!
      The Roth is your a great choice for your first step… it is not an ” investment” by itself, what you choose to put in the Roth is your real investment….
      If you check into http://finishrich.com
      …and click on the ” latte calculator” you can get an idea of how much you can gain over different periods, saving different amounts and getting different returns…
      Please…get familiar with what’s available to you…and get a ROTH every year….find out how to up your returns with a little on-line moving…if it takes a couple of nights or even weekends, you will never regret being informed about ” investing”…..it’s something that should be taught in every school at every level …Teach people to take care of themselves and their futures…improve the lives of couples and families…. And we wouldn’t have a zillion people trying to live off Soc. Sec.
      Good luck
      P.S. I hope you get to read this part, I’m adding it much later…BUT, I didn’t want to forget to STRESS that a ROTH IRA is probably THE very best investment for an average American..”.tax-free income” an unbelievable concept!!!
      You’ll get my drift after you pay taxes on EVERYTHING for the next 30 years.

  24. QUESTION:
    Why don’t we just make SS a forced Roth IRA in fixed rate accounts if they want to keep it?
    You very rarely ever get back your contribution, so this would guarantee a better return and the government can’t touch it. Then they can’t use it for their welfare.
    Untrue sad cat – it can be specified that only guaranteed return investments are possibly like CDs.
    I hate forced too, but it takes away their arguments.
    R – Yes that is what needs to end. People have been lied to and told it was going in a lock box for them.

    • ANSWER:
      You premise is correct and should have been done by now. Republican George W Bush wanted to protect the people’s Social Security money & get it away from gov’t's hands though the Democrat Party would not let their theft of your social security dollars go. The Democrats want this money to steal & redistribute as they deem fit.

      The gov’t doesn’t want you to have this money. Social Security was created to steal more money from everyone without calling it a tax. The original date you would start receiving benefits was based on when you were supposed to die. People are living longer so the gov’t scam is being revealed. Socialist & Communists Parties have always know that if you steal from Peter to pay Paul & Pablo you will usually win w/ 2/3rds the vote. This has been the Democrat Party platform for years & will continue until they become the single ruling party like most Communist Nations.

  25. 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.

  26. QUESTION:
    im 18 years old, should i open a ROTH IRA? anyone know where to find all the rates for them?

    • ANSWER:
      This one, l don’t know!!!

  27. QUESTION:
    What is the average annual rate of return on a Roth IRA today?
    I’m looking to figure out what the average annual rate of return on retirement savings accounts. Any info helps! Thanks!

    • ANSWER:
      A ROTH IRA is simply a tax shelter for retirement accounts, its not a type of investment. Same is true for traditional IRA accounts, 401k’s 403b’s SEP’s, and other retirement account types.

      WITHIN the IRA or similar account, you can choose almost any investment type. One person might open a ROTH IRA and put their money into a savings account earning a quarter percent interest, but another person might put money into a ROTH IRA by investing in small cap mutual funds and earn 30% on their money (or lose 30%).

      The “ROTH IRA” is not a type of investment, its a type of legal tax shelter for retirement savings.

  28. QUESTION:
    Roth IRA – how do you know you will be in higher bracket?
    I know Roth IRA is better “if you think tax rates will be higher in future” but how can really somebody predict about the future? I have no idea right now if I’m be making more money by the time I retire or if I’ll be out of job an living off social security. In that case, should I just split up the contributions to both Roth IRA and Traditional IRA?

    • ANSWER:
      Nobody knows what future tax rates will be. While they may be lower for your current income, a dollar will be worth less (inflation), so you will need more dollars to maintain the same standard of living, which may end up in same or higher tax bracket.

      I am only 10 years from retirement (hopefully) and I figure that I will need as much income as my net pay now plus social security to live the same lifestyle.

      General thought when you are young is to contribute at least enough to get company match for a 401k (if eligible), max out your Roth IRA, and if you have more contribute more to 401k. As you get older and tax rate higher, contribute more to 401k or IRA to keep taxable income under next tax bracket. An IRA/Roth IRA mix should result in less retirement tax than if all your savings was tax deferred, and the Roth also gives you flexibility for nontaxable withdrawals.

  29. QUESTION:
    If I convert to a ROTH IRA and choose to spread the taxes over 2011 and 2012, what are the tax rates I use?

    • ANSWER:
      If you choose to use this method for the tax year 2011 income tax return that you will file in the year 2012 and the tax year 2012 income tax return that you will file in the year 2013 the taxable amounts will be added to all of your other gross worldwide income and be subject to the federal income tax at whatever the marginal tax rates may be in the future years to come.
      Can you make a good guess at this time of what the income tax rates may be in the future years to come.
      Hope that you find the above enclosed information useful.

  30. QUESTION:
    Which is tax at a higher rate – Roth IRA or general mutual fund account (capital gain)?

    • ANSWER:
      Roth IRA distribution is compeletely tax free.

  31. QUESTION:
    Roth IRA Certificate of Deposit in international bank?
    Can I put money earned in US into a Roth IRA Certificate of deposit in an international bank ?
    Reasons –
    1) i am happy with a lower but steady bank interest rate on my retirement funds.
    2) i don’t like bond funds. I would like to buy a 10-15 yr maturity CD and have peace that i wil get the same interest rate.

    Why international ?
    - because of higher interest rates.

    Is it possible ?
    Is it possible in an indian bank (i am interested since i am a citizen of india working in US) ?

    • ANSWER:
      If an Indian bank offers the product, then you can do that. I know that US banks offer ROTH IRA deposit accounts.

  32. 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….

  33. QUESTION:
    Which savings account has a better interest rate: TSP, Roth IRA or 401K?
    Is it good to have all three?

    • ANSWER:
      You misunderstand. They are not “savings accounts.” Those are simply different types of retirement accounts – not specific investments. They do not have fixed “interest rates.” It all depends on what specific investments are held within the accounts. That is up to the account holder.

  34. QUESTION:
    What Roth IRA company has the highest Compound interest rate?
    I’m looking for somewhere to put my money and build it up as well. Help?

    • ANSWER:
      For information on what a ROTH IRA is and whether or not you should get one visit my Blog.

      http://familymanfinance.blogspot.com/

  35. QUESTION:
    Is a money market IRA considered a traditional or Roth IRA?
    I have a money market IRA that was converted from a Roth IRA over 2 years ago. I didn’t like the rate I was getting in the Roth and converted to the money market, but now I am unhappy with the return I am getting on the money market IRA. Is my money market IRA considered a traditional IRA? I’m 27 and would like to withdraw approximately 3,000 for something that would not qualify under any of the exceptions. Will I end up paying the 10% early withdrawal fee and will the 3000 be considered income?

    • ANSWER:
      My guess is that you still have a Roth IRA. I’m unaware of anyone converting a Roth IRA into a Traditional IRA. It’s usually the opposite. You probably just switched investment vehicles within your existing Roth IRA. However, your statement for the account should state the designation of “Roth IRA,” so that should be easy to determine.

      Assuming you still have a Roth IRA, you can probably withdraw most of your money without triggering income taxes or an early withdrawal penalty.

      Why?

      Because your Roth IRA is funded with after-tax dollars. As a result, your original principal contributions can be withdrawn tax-free and penalty-free. It’s only the interest you earned on your principal which is subject to income taxes and a 10% early withdrawal penalty if withdrawn.

      For example, suppose you made the following contributions to your Roth IRA and invested the funds in a money market account:

      2008 – ,000
      2007 – ,000
      2006 – ,000

      Let’s say that in 2009, the account is worth ,500.

      Since your original contributions add up to ,000, you can withdraw up to ,000 tax-free and penalty-free. After all, you already paid income taxes on those contributions before you made them. However, the remaining 0 (interest earned) is subject to income taxes and a 10% early withdrawal penalty if withdrawn.

      I hope this helps!

  36. QUESTION:
    How do I know if a Roth IRA or a regular 401K is a better long term investment?
    Both IRAs have advantages and I know that tax rates are not predictable. I am age 54 and I need to know which one is better over the next 10 years to take me into retirement.

    • ANSWER:
      The consensus on Diehards.org seems to be .

      1. Contribute to your 401K up to the Company Match (The Free Money)

      2. Fund A ROTH IRA

      3. Fund your 401K to the Max.

      4. Taxable investment if you have any $$$$ left…lol

      If no Company Match go directly to ROTH IRA
      It is before taxes so all the money you get is tax free.

      Good Luck Gerry

  37. QUESTION:
    What % rate are Roth IRA’s taxed at?
    You’re allowed to put in 00 a year, which is 6 a month. But, that’s the after-tax amount. How much would I have to put in to actually put in 6 a month?
    Traditional IRA’s are put in tax-free and then taxed when you take it out. Roth IRA’s are taxed when you put them in and not taxed when you take it out.

    • ANSWER:
      You would still put in 6 a month. Total of 00 for both cases. Each IRA has a different tax structure but you still put the same amount in each.
      Roth is good for young people that allows the magic of compounding to make all future withdraws tax-free.

  38. QUESTION:
    Where to open a Roth IRA account?
    Any recommendations for a good place to open a Roth IRA account with? (Cheap rates, etc.)

    • ANSWER:

  39. QUESTION:
    Is it possible to convert my checking accounting into a Roth IRA?
    I have come across a bank that pays a good interest rate on a checking accounting. Is it possible to incorporate this checking accounting into a Roth IRA?

    • ANSWER:
      No. You can’t write checks on an IRA.

  40. QUESTION:
    What options do I have for the funds I have put away into a Roth IRA?
    I have already set up a couple IRA CD’s before the market went too far south knowing I wouldn’t touch the money for a long time. But what are some other options with higher rates of return?
    I have already set up a couple IRA CD’s before the market went too far south knowing I wouldn’t touch the money for a long time. That’s obviously the safe bet, but what are some other options with higher rates of return? Can it be used in Mutual funds? Stock?

    • ANSWER:
      The types of investments you can purchase within a Roth IRA are almost limitless, depending upon where the account is held. If you have it at a regular bank, which is what it sounds like, the CD’s are probably about the only option, unless the bank also has a brokerage department.

      If you transfer your IRA to a brokerage firm, or the brokerage-arm of your bank if they have one, you can have the ability to purchase stocks, bonds, mutual funds, and all sorts of other fancy securities within your Roth account.

      If you consider yourself a “savvy investor”, you could consider moving your account to a company like eTrade where you can manage your own investments. If you prefer to have personal guidance, you can ask your banker if they have a brokerage department they can refer you to, or try another full-service broker in your area.

      Advantages & Disadvantages?
      CDs:
      + Predictable Returns
      + FDIC Insured
      - Low rate of return
      Securities:
      + Potential for significantly higher returns
      - Not FDIC insured. May lose value.

      Best of luck!

  41. QUESTION:
    At what rate is money invested into a Roth IRA taxed?
    I heard it gets taxed before you invest it compared to a traditional which is taxed when you take it out – so how much do they tax before you put it into the account? And is there a maximum of 2K/year you can put into it like I heard in the past to be the case? Can anyone open one and where would you go to do so and do you get taxed on the dividends earned each year or no taxes at all period once it’s pre-taxed?

    • ANSWER:
      You contribute to Roth IRA from your post tax dollars. Just as deposting your money to any bank account and you don’t claim any tax credit for doing so. On the oterh hand when you deposit money for regular IRA that amount can be reduced from your taxable income in tax filing and you’d get a tax credit now.

      When you withdraw from your Roth IRA you pay no taxes on your deposits(contribution) but pay tax only on earnings. On the otehr hand when you withdraw moeny from Traditional IRA you pay taxes on your deposits as well as earnings. Maximum contribution is 5000 put together, and will be reduced based on your other retirement plans such as 401K, your income etc.

  42. QUESTION:
    Should I pay off school loans with a 7.25 interest rate with all the money I have in my Roth IRA’s?
    I’m 26, going back to college but almost done. I am going to end up with about ,000 in debt when I graduate with Bachelors. Should I pay off some of this school loan debt with all the money I have in my Roth IRA?

    • ANSWER:
      I disagree with themurp. If you withdraw money from IRAs… which is a bad idea period… you will have a 10% penalty, plus tax. You avoid the penalty ONLY when you use the fund to pay qualifying expenses. Current student loans do not qualify.

  43. QUESTION:
    i’m thinking of starting a ROTH IRA with fidelity investments because i read that they have low charge rate…
    …now because they have low rates does this mean the rate of my returns will be lower than say if i start a ROTH IRA with an investment company that charges a high rate for there fees?

    also what requirements do i need to know before i go there and inquire about a roth ira?

    • ANSWER:
      Not necessarily. On average, funds with lower expenses do perform as well, before expenses, as funds with higher expenses perform, before expenses, which suggests that the funds with lower expenses will perform better after expenses.

      The main requirements for a Roth IRA are:
      1. You must have earned income.
      2. The total of all your traditional IRA and Roth IRA contributions cannot exceed a certain amount (approximately 00, but it varies from year to year and by age), which means that if you have already contributed that much to a traditional IRA for this year, then you cannot contribute to a Roth until next year.
      3. Your income cannot exceed a certain amount (I do not know the exact figure, but it is well over 0,000).

  44. QUESTION:
    What is considered a cheap commission rate for a Roth IRA? What is average? What about fees, etc? What?
    is considered standard (in terms of what companies charge)?

    • ANSWER:
      First fees: if you are working with a brokerage firm, bank’s brokerage, or mutual fund company expect a fee for having the account. The lowest will be having it directly with a mutual fund company and that may run to per year. The brokerage company will charge more anywhere from to 0. Note that it is also possible to have a Roth IRA as a deposit account at a bank. Here you will maybe not have to pay a fee but the only investment option is the bank deposit which will typically earn interest at the same level as a 12 -18 month cd, depends on the bank. As for commissions: this can be all over the place. The lowest commissions will be with the no load mutual fund companies like Fidelity. The brokerage firms will charge in one of two ways–either a commission which depends on what you buy in the account or a management fee of some type which will typically be 1 – 1.5% of the amount in the account. The commission will be paid only on the amount going into the account and may be as high as 5.75%. If you have larger amounts of investment with them there may be some discounts. Hope this helps.

  45. QUESTION:
    Does it benefit me to roll my traditional IRA in a Roth IRA if I had no income for ’06?
    I had [FAQ-QUESTION] earned income and 00 interest and dividend income for tax year 2006. Is now the time to roll to a Roth? How is the tax rate determined? Prior year income? I have savings to pay the tax so I’m not worried about having to pay the tax with principal thus paying penalty tax also. Thanks a $$$$$$$$$$$.

    • ANSWER:
      You have missed the 12/31/2006 deadline for converting the traditional IRA to a Roth.

      But if you have little or no income in 2007, be sure to take advantage of converting with little or no tax owed. The tax rate is determined by adding the amount converted to your other income.

      There would be no penalty assessed on a conversion, only income tax.

  46. QUESTION:
    roth ira conversion and tax payment over two years?
    I converted all of my trad iras to roth this year with the thoughts of paying all of the taxes this year (lower tax rate). Now that the Bush tax rates may be extended have I disqualified myself from paying the taxes over a two year period or can I still extend the taxes over two years?

    • ANSWER:
      You have not yet made an election and will not need to do so until you file your 2010 federal income tax return. If you want, you still have plenty of time to decide to claim 1/2 of your Roth conversion in 2011 and the other 1/2 in 2012, or to claim the entire conversion in 2010.

  47. QUESTION:
    roth ira tax rate??
    who decides what it is– is this a cut in stone government thing
    is this set by the brokerage?
    is it set by my tax rate?
    what i ment to ask is with a roth ira the taxs are paid upfront this i know but the taxs i pay is based off of what– my tax bracket-a random rate by the gov or a random rate by the broker?

    • ANSWER:
      Income from a ROTH IRA can be withdrawn tax free. You use after-tax money to fund a ROTH IRA with the benefit of not having to pay tax on the proceeds once you retire.

      The income from a TRADITIONAL IRA is subject to whatever the then-current tax rates are for your income level. You get a tax cut today on the contribution yet the profits are all subject to tax as you withdrawl funds.

  48. QUESTION:
    In a Roth IRA Conversion (from a traditional IRA) how do I answer on the tax withholding election?
    I am transferring a traditional (rollover) IRA to a ROTH Ira, both within the same company (Ameritrade). The form gives me options in the “Tax Withholding Election” section
    1) I elect not to have Federal Income Tax withhold effective (enter the date you wish)
    2) Please withhold taxes at the rate of 10%
    3) Please withhold taxes at the rate of X% (enter the % you wish)

    My goal is to transfer all the money into the Roth IRA and then I will pay taxes out of my regular income, i.e. money in a bank or whatnot. I’d rather have the full amount transferred into the ROTH, and than pay taxes out of my own pocket instead of having anything withheld. Is this legal and possible and if so should I just choose I elect not to have federal income tax withheld. Also if I choose this option what do I enter as the date effective? I don’t want to be hit with penalties. Thanks

    • ANSWER:
      Yes, you can pay the taxes without them withholding, excellent idea, but be aware that you may have to pay a penalty as a result if you do not file and send estimated payments. There is an IRS rule that if the amount you owe in taxes is more than I think it is 10% of what you paid, they penalize you.

      Now also be aware that if you have a great deal of money in your traditional IRA, tranfering it all in one year may bump you into a higher tax bracket also. That will not be a pleasant experience.

      You do not have to transfer it all at once. You can perform the transfer over a number of years so as not to be screwed by your wonderful uncle.

      I just last year did a transfer of a portion of mine. I will transfer some more this year and next.

  49. QUESTION:
    Loans versus pulling money out of a Roth IRA or 529 for College?
    I have two children, 9 and 11, whom I am planning to put through college. I am debating whether to put money into a 529 investment fund or putting it into a Roth IRA and pulling out the money needed to pay for their college when the time comes.

    What I would rather do is pay for most of their college expenses by having them get student loans. I would be able to keep my money in a compounding interest account and make money against the interest rate of the student loan. I could then pay their loans off over five years after they graduate. This would not only net me more interest earned, but would also establish their credit for when they need to acquire more serious loans such as a new car loan or mortgage.

    One of the reasons that I am leary of putting money into 529 (which I know would work better than a Roth IRA) is that they will tally that in when putting together a student loan package. As far as I know, retirement accounts cannot be touched.

    • ANSWER:
      The thing is that the tax laws could change in 10 years when your oldest graduates from college in regards to the tax deductions. Also, with the loan interest rate trends going up with a strong chance of more interest rate hikes, odds are depending on the investment that it might not match the loan interest rate. The best thing is to consult an accountant before you make your final decision. However, it is an idea also to encourage your kids to keep their grades up because it will lead to possible merrit based help from the college and the state in some cases. Good luck!

  50. QUESTION:
    Are there any whole life insurance / Roth IRA options similar to Colorado Banking?
    I recently spoke to an investment broker about an option offered by Colorado Banking that offers an IRA with a guaranteed interest rate where the amount you put in (0 per month) goes toward a 80,000 whole life insurance plan and also into an IRA that would return 319,000 at the end of 45 years. I’ve done the math and it does work itself out, but I’m curious if there are any companies that compete with the same type of plan.

    • ANSWER:
      Woah. Sound like you are being rip off. I don’t know how much you are spending on the whole life insurance, but I bet you are spending at least 0 on it. And what interest rate are you getting on your IRA?

      I have a 20 year term policy with 0k coverage at age 30 and spend only /month on it. I also put in 0/month into a Roth IRA and with an average rate of return of 10% over the 20 year period, I would have about 6,278,

      But if I was in your situation and invested difference of 0/month for the next 20 years with a rate of return of 10%, I would have ,883. In 45 years, I would have .2 million. Or if at the end of the term, I increase my contribution from 0 to 0/month and continue to invest for the next 25 years, I would have about .3 million. Yes I know 10% is not guaranteed, but with the mutual funds I seen and currently have, they have average out 10%-14% during the last 25 years (even with the recession we are in right now!)

      Are you sure you still want to do business with that bank?

      By the way, I have life insurance and my investments at Primerica Financial Services. You should check them out. If you don’t like the company, at least get a financial needs analysis which is a helpful financial guide to help you reach your financial goals. They do it for free.