What Is An Ira Account

Frequently Asked Questions

1. QUESTION:
   How much does it cost to open up an IRA account?
   Do banks charge different rates? Is it a rate? or a flat first time fee? to open up an IRA account. Which would be better? Roth or Regular? What’s the difference? Appreciate your help!

   • ANSWER:
     Many mutual funds charge no first time fee, although there may be an annual maintenance fee on small accounts.

     A traditional IRA allows you to deduct the contribution from your taxable income (if your income is below certain limits).

     A Roth IRA permits tax free withdrawls (as long as you abide by the withdrawl rules).

2. QUESTION:
   What should I know before opening an IRA account?
   What is the difference between an IRA and a savings account? Would I be able to tap into the money saved in my IRA before retirement in order to purchase my first home? Would opening an IRA with a credit union give me any additional benefits that my current bank would not be able to provide?

   • ANSWER:

3. QUESTION:
   Can you use an IRA account for different purposes than what its set up for?
   Ok, so my parents set up an IRA account for my college tuition, but i’m only going to community college and theyve decided they can pay for it through paychecks. But, I’m in desperate need of a newer car since mine is at the end of its life. They already used ,000 of it to put a new roof on our barn but claim we cant use it for a car. Whats up with this? Can we use it for a car? how do these accounts work?

   • ANSWER:
     You can always take money out of an IRA at any time, however you will pay a 10% early withdrawal penalty unless there is a qualifying situation. (and you will have to pay income taxes on the withdrawal if it is a traditional IRA – not a Roth IRA)

     Unfortunately, a new car is not a qualifying situation. But — if it is worth the 10% penalty, and the taxes, and the loss of compound interest, go for it.

4. QUESTION:
   How can I verify that my wife opened an IRA account without my consent?
   Me and my wife had been separated for about 3-4 months now not legally yet. I found out that our marriage was being controlled and it wasn’t real. We have been married for 7 months now. She said she opened up an IRA account for both of us. She had my w-2 form and social security number. How can I find out if this is true. Currently I’m unemployed and somehow she is able to see my employment status. What does this mean…

   • ANSWER:
     It means she is talking to an attorney, and he is running financial and credit reports on you to determine any hidden assets, unknown credit card accounts, bank or savings accounts, other assets or liabilities.

     Part of the divorce settlement process. You should be doing the same thing.

5. QUESTION:
   What’s the maximum amount of money you can roll-over from TSP into an IRA account?
   Lets say, hypothetically, I have about 0,000 in a Thrift Saving Plan account I have from being in the Air Force for 20 years. I’m going to retire and I wanted to throw it all into an IRA account and start investing online with an online broker of some sort. Could I roll over the entire amount or is there a maximum allowed? What would be the better choice of IRA accounts with this kind of money? Roth? Traditional?

   • ANSWER:
     I am not an expert in TPS plans. They seem to be similar to gov sponsored 401(k)s.

     http://en.wikipedia.org/wiki/Thrift_Savings_Plan

     It look to me like this is not a problem. if you roll it over you MUST do it in an “IRA Rollover.”

     If you roll it over to a Roth the ENTIRE account will be subject to ordinary income tax. if you are under 59 1/2, the IRS will tack on an additional 10% penalty of the gross.

     I would be very cautious of putting your money in an on-line broker and start gambling with it in the market. You could wipe out your retirement and then what?

     If you have lots of assets I would seek the advice of a professional advisor with 15+ years retirement planning and market experience.

     Good Luck!

     Common IRA Rollover Mistakes

     http://www.investopedia.com/articles/retirement/06/rollovermistakes.asp

6. QUESTION:
   What are the tax penalties for closing an IRA account?
   My IRA is going lower and lower. I am thinking about closing the account, but do not know what the tax consequences and/or penalties will be.

   • ANSWER:
     ROLL IT INTO A CD IRA!!!!! you want to take it out of the stock market – but you don’t want it all to become taxable PLUS owe the penalties PLUS put you in a higher income bracket – do NOT just take it out – after all of the fees penalties and extra tax you pay you would have been better of leaving it there…roll it into a cd IRA

7. QUESTION:
   Is There A Minimum Age A Person Can Open An IRA Account?
   I have been investing part of my sons Christmas and Birthday money in EE savings bonds since he was a baby.
   He’s 12 now and doing pretty good with what he has so far.
   I would like to take the minimum investment (usually 00) from some of his bonds and start him on an IRA.
   So he may be more inclined to dollar cost averaging when he starts working at an early age.
   Would this be a bad idea or is there a even better option?

   • ANSWER:
     There are any number of sources on the web that say there is no minimum age requirement for opening either a traditional IRA or Roth IRA. The following link is one example. Your son must, however, have earned income, which he may not have at his age. Just transferring investment earnings to an IRA won’t work.

     “there are no minimum age requirements to open an IRA; however, earned income is a requirement to open a Traditional or Roth IRA ”

8. QUESTION:
   How much should I contribute to open an IRA account?
   I’m 30 years old, and looking to open an IRA account. To be frank, I have to idea what I’m doing, so I’ll be visiting an investment company like Scottrade. Am I starting too late? Which investment company/financial institution should I visit? Thanks!

   • ANSWER:
     How Much Can I Contribute to a Roth IRA?

     Each year, the IRA rules change. One of those changes is the contribution limits for the year. One of the main questions asked by an individual opening an account is, “how much can I contribute to a Roth IRA?” The IRA issues a chart each year that depicts what the allowable Roth IRA contributions are. These limits do change annually. That change is usually an increase that reflects inflation and the cost of living. Since a Roth IRA retirement account is designed to save for retirement, all IRA owners should be aware of the contribution limits.

     When an account is opened, your eligibility will be based on your income. There are strict guidelines that must be met. These will be discussed later in this article. Currently, the maximum allowable contribution to a Roth IRA account is ,000 per year. This amount is for anyone who is under the age of 50. So, if you are 37, you will be able to contribute up to ,000 each year. Now, if you are over 50 years of age, you are allowed a catch-up amount of ,000. This is in addition to the standard ,000 limit. Therefore, individuals who are over 50 can contribute a total of ,000 to their Roth IRA retirement plan every year.

     Know What are the Contribution Limits to Your Roth IRA

     As mentioned, each year, the cost of living and inflation is taken into consideration. Often times, these will result in an increase of the allowable contribution. However, there is another factor that could actually decrease what you can contribute to a Roth IRA. Your income could have a significant impact on whether you can contribute to the IRA. First of all, one of the eligibility requirements to even open a Roth IRA is that you must have a source of earned income. The IRS will then take that income and determine if you are eligible based on the income limits. These IRA limits regarding income will vary depending on your tax filing status. Currently, under Roth IRA rules, if your tax status is married filing joint or if you are a widow(er), your income limit is 9,000. This is the maximum amount you could have made in 2008 to continue contributing to your Roth IRA in 2009. In 2010, that limit is increased to 6,000. Now, if you are single, your income cannot exceed 6,000 for 2008 and 0,000 for 2009. What does this mean? Basically, you can only earn up to the stated amount to be able to contribute the maximum amount into your Roth IRA. If you exceed the set limits, you will enter a phase-out period. This is when the allowable contribution amount begins to decrease, based on your earnings. It is possible for you to completely lose the ability to contribute altogether if your income is too high.

9. QUESTION:
   What is the difference between a 401k & an IRA account?
   What is the difference between a 401k & an IRA account?

   Thanks,
   - Murphy

   • ANSWER:
     The 401K is through work and has higher limits.

     There is a subtle penalty difference is you are terminated from work at age 55 or older.

10. QUESTION:
    Would the employer match amount gets forfeited upon a 401K roll-over to an IRA account?
    Upon retirement, a 401K account with employer & employee match amount upon direct roll-over to an IRA account shall not have the employer match amount forfeited & not included on the total match distribution. Are some employers forfeiting their match anyway & for what justification?

    • ANSWER:
      Just because you retire, doesn’t necessarily mean you get to keep the employer match. Most have a vesting schedule: 20% @ 1 yr, 40% @ 2 yrs, 60% @ 3 yrs, 80% @ 4 yrs, and 100% @ 5 yrs. Most vesting schedules go 5 years. If you’ve been with the company 5 yrs, you get 100% of the company match.

      I’ve done two 401k rollovers. I got the monies I was entitled to, per the vesting schedule.

11. QUESTION:
    Is it too late to open an IRA account?
    I’m 40 years old and do not have 401K or any investment portfolio. I have a job and could save up in a IRA account, but what I mean by “too late” is to withdraw sizable income when I retire.

    Also is buying some rental properties a good idea for my retirement? Because of the income is prolly higher than IRA.

    Thanks!

    • ANSWER:
      Starting a retirement savings plan of any kind (IRA, or 401(k)) at age 40 is better than age 41…

      You can still accumulate a substantial nest egg before you retire.

      Buying rental properties? Unless you want a second job as a landlord, I’d recommend staying away from buying rental properties. You’d have an illiquid, poorly diversified portfolio, with risks you may not fully understand.

      Find some simple mutual funds with low expense ratios for now.

12. QUESTION:
    I am looking to open up an IRA account?
    I want to open an IRA account with about 00 dollars. Then monthly I want to add around 0 dollars. Where do I go to open on of these accounts. I still don’t understand the basis of it, what percentage it pays, if it is accessible? When I asked the gentlemen at the bank he said I wanted to open up a CD but from everything I hear CD’s are a bad way to go?!?! Please Help!!!! All answers will be appreciated.

    • ANSWER:
      An IRA is a form of retirement account. it is a form of investing, with that said there is no Guarantee rate of return but for calculation purposes figure 8% to be conservative.

      It being a retirement account there can be penalties for removing the money prior to the age of retirement with a few exceptions (first house and some others).

      CD’s or Certificates of Deposit are different in that they do have a definitive end date (3m, 6m up to 20years) and can be renewed but you will also have penalties if you end them early so if you do use one make sure it is not money you may need!

      Back to the IRAs, there are two different kinds, not knowing too much about you it is hard to make the call on what you should get but don’t panic whichever one you pick will be fine.

      The first is the standard IRA, which you put money into pre-tax. This is a great savings on your tax return because you are taking down your taxable income. In you are not in a high tax bracket it may not make a huge difference for you.
      Also the money that is in you IRA will be taxed when it is taken out during your retirement.

      The other type of IRA is the Roth IRA, which is all post-tax money so there is no effect on your tax return. In the Roth IRA the money you contribute and it’s earning would not be taxed when you do with draw it during retirement.

      Now for places to get this all rolling, you can try Fidelity Smith Barney or Vanguard. I used Vanguard to set up one for myself and sister but I know the initial set up investment is a minimum of 3K but that have super low expense rates. Fidelity has a very easy to navigate site and lots of information so it would be a good resource. Smith Barney is also easy to use and has a wide variety of funds to pick from.
      CD’s aren’t bad but they are also not what you should be using as a retirement vehicle.

      Lastly there is a limit to the amount you can add to your IRA (either type) and I think it is 5K this year so try to fund it as much as you can. It sounds like you are off to a great start. Hope I helped and Good Luck!!

13. QUESTION:
    What can I do if my boss is deducting money from my check for an IRA but not putting it in my IRA account?
    The last time money was sent to the financial company was for the money deducted in January. Is that illegal? What are the consequences? What can I do as an employee?

    • ANSWER:
      First go to HR/Payroll and ask them why this is happening. It might be that there is a reporting error (like they have the wrong social security number on the monthly/weekly remittance for that goes to the IRA company). See what they say first.

      If they lie, or do nothing, then you need to call the IRS, go to irs.gov and find a phone number for employment withholding issues. Then call your state attorney general’s office and tell them the same thing.

      It is very illegal and highly punishable for your company to do this. And while your at it, start looking for a new job. If this isn’t an honest mistake, then company knows they are stealing money from you, they know that they will get in deep trouble from the IRS and from the state you live in, yet they are still doing it. Why? You might ask? Probably because they are broke and you will lose your job soon anyway.

      Go, go talk to someone in HR/PR today.

14. QUESTION:
    Can my wife open an IRA account when she is not working?
    I already have an anniuty and I am saving the maximun allowed.I also want to know what is you rating on one year at 15,00.oo dollars?

    • ANSWER:
      If married filing jointly, she sure can……

      I’d get away from annuities.. they as a group are HORRIBLE investments…for the ROI you get…

15. QUESTION:
    What is the absolute best online broker to open up an IRA account with?
    I will be joining the military and i plan on investing my money somewhere untill i retire in 20-25 years. I just need to know where should i go?

    • ANSWER:
      Besides online brokers, of which Schawb, TD Ameritrade, Fidelity, and ETrade are all good, consider also using a mutual fund, especially if you do not wish to spend a lot of time managing your investments. Of course you will need to research these also to find a good one, but you will not have to invest so much effort once the initial search is completed. One that has a very enviable track record is Bruce Fund with a whopping 30% annual return during the last 5 years. That is extremely difficult to beat.

16. QUESTION:
    Will I be able to put my pension from an old job 31000 dollars into an IRA account?
    I also have about 12,600 dollars in my 403 b account and 4000 dollars in a traditional IRA account. Will I be able to move all this account into a Roth IRA? What are my best options and w/c funds are better load or no loads fund.Presently, I am not working because I decided to go back to college to pursue a carreer in healthcare.

    • ANSWER:
      No load is better than load.

      403(b) is not a pension.

      You can put money from a traditional IRA into a Roth.
      You can put money from a 403(b) into a traditional IRA.
      Not sure if you can put money from a 403(b) directly into a Roth or if you have to put it into a traditional first and then a Roth.

      If you put money from a 403(b), 401(k), traditional IRA, etc., into a Roth, this is a “conversion”, and you pay tax on it. However, you do not pay the 10% penalty.

17. QUESTION:
    what is the 20% for when it is witheld from an ira account?
    i am getting a lump sum from an ira account. they are already taking 20% . do i still have to pay more taxes later on this money come tax season
    or does the 20% cover that at tax time

    • ANSWER:

18. QUESTION:
    Jack decided to put 0 into an IRA account every 3 months at a rate of 6% compounded quarterly.How long will?
    Jack decided to put 0 into an IRA account every 3 months at a rate of 6% compounded quarterly. How long will it be before the value of the account is 0,000? What will be the balance in 30 years when Jack retires?

    a) 10 years, .8 million
    b) 18 years, 1,860
    c) 7 years, $ 4 million
    d) 21 years, 1,355

    • ANSWER:
      Jack decided to put 0 into an IRA account every 3 months at a rate of 6% compounded quarterly. How long will it be before the value of the account is 0,000? What will be the balance in 30 years when Jack retires?

      d) 21 years, 1,355
      This is the closest answer, although it’s not correct.

19. QUESTION:
    Should I open an IRA account?
    I am 18 years old and I am wondering if I should open an IRA account to get ahead. Any tips? Do I need to look out for something? What is a good rate?

    • ANSWER:
      Do you understand what an IRA is and how one works? Educate yourself first.

20. QUESTION:
    Does any one have an IRA account with Primerica?
    How did you get one, and is it worth it to begin an account of this kind? Have you lost money or gained? How long did it take you to see if your investment was going to be a good idea or not with this company?

    What are the pros and cons of this type of investing?

    Is it a reputable company, or would you suggest another company, and if so… Why or Who?

    Have you ever worked for this type of company, it is a pyramid scam, or legitimate job?

    Experience people only please, as I am new to this and need an educated answer.
    It is a Roth IRA.. (not exactly sure what the difference is in a regular IRA and a Roth IRA)

    It would be based on stocks, and the company picks the stocks, I wouldn’t have the choice, that’s what worries me.
    The reason I asked about the pyramid scam is because they were trying to get me to work for them, and I would have to go around convincing other people they needed this as much as they say I do, sounded slightly like a pyramid to me.

    Especially since I knew a guy once that said he couldn’t get anywhere with it, so he quit, and so did the guy that recruited him??

    • ANSWER:
      What type of investment is going to held in the IRA? Stocks, mutual funds, cds?

      This not a pyramid scam. From what I hear they are a reputable company.
      You should get an IRA for yourself, it whether it is with them or another company. The most important thing is the investments being held in IRA. You want to look at past performance of the investment as well as the consistency of the investment. Look for one with consistently good returns not necessarily the highest return last year.

21. QUESTION:
    How does someone get an IRA account?
    What is the minimum I could contribute? What interest rates are involved?

    • ANSWER:
      Some banks will let you start with just 00.

      Suggest you read up on the subject at www.Vanguard.com.

      You can open an IRA at a bank or mutual fund company as well as some other choices. You may choose how to invest the money.

      Vanguard’s STAR fund is a good choice.

22. QUESTION:
    What is the best way or investment companies to seek for asset allocation to diverify an IRA account?

    • ANSWER:
      If you are looking for equity diversification, I would consider MOFQX. I am not certain why I have never recommended it. It really wasn’t until this weekend that it dawned on me that I should be doing so. MOFQX is unusual in the mutual fund industry. It gets weird ratings because it does not put its money in any specific sector or market capitalization or even country, through American Depository Receipts at the NYSE. It isn’t a growth fund, it isn’t an income fund it isn’t a value fund.

      As far as I can tell, it is the only fund that is an any cap fund, any style fund, anything fund. It invests by seeking only those investments that can reasonably be expected to do above average on a consistent basis regardless of what category Morningstar, Lipper or Kiplinger’s put them in. The goal is to make the customer money, not fit inside a marketing category. They keep getting quoted in Barron’s, Forbes, Fortune, CNN and so forth.

      However, because they go where the money is, and that keeps moving, it means their ratings are all over the board because no one can figure out where they should be classified.

      In my own portfolio, I do the same thing. Six months ago, nearly my entire portfolio was in NYSE stocks because that is where the money was. Lately it has been drifting toward great financials and other beaten up companies.

      For any debt portion of your IRA, I would consider splitting out your IRA into two parts because the best debt instruments right now are at banks not corporate bonds. Going to www.bankrate.com and putting some of your money in the highest yielding CD’s will, either laddering them with 1yr,2yr,3yr,4yr and 5yr cds or only buying one specific period of cds will get you more than any bond mutual fund or any specific investment grade bond unless you buy far out into the future. Given inflation expectations, that probably is not prudent.

      So, for equity, MOFQX is really great. I personally suspect that it will be the “Fidelity Magellan” of the next ten years, although back when Fidelity Magellan was the best fund not now. I say this because their system is the only still out there trying to do things because they make sense, not because they can be sold readily by a broker.

      For debt, love the banks, the bond market isn’t competitive right now because banks are seeking liquidity and want your money badly, all of them are like that, but some will pay more than others. FDIC insurance and yields above governments and yields above corporates….what is not to like?

23. QUESTION:
    Can a relative put money in an IRA account for a child, then pull the money out later for personal use?
    I have a sister that placed ,000 in an account for my son, after a relatives death. She was in charge of the relatives trust, and supposedly abided by the trusts request to give my son the ,000. She opened an account placed the ,000 in the account, and made herself the custodian of my son’s account. She then took that ,000 out after a couple years, and used the money for her own personal use, to keep up with her phoney lifestyle, while closing out the account. . Is this legal? What legal rights do I have to get my sons money back? How do I get a hold of the trust? Is it worth it? Any advice would be appreciatted. Thank you

    • ANSWER:
      It all depends on the type of account that was opened. I doubt it was an IRA, since IRA accounts can not be opened for a child (with the exception of an educational IRA- but I am pretty sure that 10k exceeds the annual limit set for those). It maybe sounds like it was a Gift to Minors or Transfer to Minor account, especially if she was the custodian. Some accounts the custodian is free to take out the money as he/she wishes (dependent on the account, not any trust rules that were set).You should have been given a copy of the trust when the relative passed away, since you are the legal guardian of one of the heirs. Your best bet would be to obtain a copy of the trust document and contact an attorney.

24. QUESTION:
    What is the difference between a 401K plan and an IRA or Roth IRA account?

    • ANSWER:
      1. 401(k) is like a scooter. You’re company that you work for provides you this savings plan. The company selects who administrates the savings account (where you park your car) which investments you can have (which road you can drive your scooter on), and they can match your contributions (like mom & dad giving you gas money). If you want to get that money (selling your car), you need to work with the “Fund Administrator”, and sometimes your “Human Resources/Supervisors” to get that money. Sometimes, you’ll only get the money if you promise to pay it back. ( yep, mom & dad want you to be responsable )

      2. IRA is like a standard car. You can select who administrates the account (or where you park your car), what investment to buy (what roads to drive on). Unfortunantly, there is no one available to give you a match on your contribution (no gas money from mom & dad); but you can deduct your contribution from your taxes. You can also withdrawl the money at anytime (selling your car). . . BEWARE. . . there are financial concequences to this. . .research before you choose to withdrawl (its like sales tax from selling your car. . .if you sell at the wrong time, you’ll get jipped on the sale proceeds).

      3. A Roth IRA is like a hybrid car. You get to pick who administers the account (parking the car) which investments (which roads to drive), but there is no matching and you can’t deduct your yearly contributions from you taxes. Instead, you can get your money without tax conseques (selling your car) when you need it. . .BEWARE. . . to get your money without tax problems, there are still rules. Research before you withdrawl funds (sell that car). Providing you withdrawl (sell that car) under the guidlines, you don’t have to pay sales tax on the withdrawl ( no sales tax from selling the car).

25. QUESTION:
    Why should I invest in an Ira account?
    I hear a lot about putting money in an Ira account. When I did a bit of asking, they allow only, I believe, ,500? What about if you have ,000. Can’t I put ,000 in an Ira, and if I can, what is the big advantage? If not, how can I invest (risk free) the other ,000?

    • ANSWER:
      I don’t think you understand.
      Most funds want you to invest ,500 as a minimum.
      If you are under age 50 you can invest up to ,000
      in a ROTH IRA or a PLAIN IRA. The differance being
      is pay me now or pay me later.(TAXES)
      A safe place for your other money is under your mattress, since other safe investments are paying a very poor rate of interest.

26. QUESTION:
    Does it matter where you open an IRA account?
    just wondering…I bank with Bank of america and they have an option to open IRA account. my retirement funds are with Fidelity and they too have open IRA accounts. as do so many other places….where do i open one? can i stick to bank of america or fidelity? what makes one site/company better than the other, if at all? thanks!

    ps – roth or traditional, which one u like? i am leanin toward roth

    • ANSWER:
      Since they all invest in the same stock/bond markets, see which one has the lowest expense ratio – how much they’re charging you to handle your money. Fidelity is most likely able to charge less than a bank. Watch out for yearly maintenance fees with a bank. As a guide, any expense ratio over 0.75% is too much. 1.20% may not sound like much but over the course of 20 years, it can add up to tens of thousands of dollars that could be yours working (earning interest and/or dividends) for you and not paying management fees. A Roth is by far the best option since it won’t be taxable when you withdraw it at 67. If you’re not sure what to go into with Fidelity, – or the bank – choose one of the widely-available Target year (on or near the year you retire) funds until you can read up and decide if something is better for you. They’re diversified and become more conservative as the year draws near. Also, if you choose Fidelity, you can view your accounts on the Web everyday if you like. Good Luck!

27. QUESTION:
    I am 24 years old and about to open an IRA account with a brokerage. Which brokerage firm do you recommend?
    I have found some that I am interested in but have no idea how they are doing.
    1. Ameritrade
    2. Scottrade
    3. Charles Schwab
    4. Fidelity
    5. T. RowePrice
    6. Etrade

    How do you think these companies are doing? Would you recommend any of them? What type of investing would you go for? Mutual Fund, Stocks, ETF, etc…?

    Open to any suggestions.

    Thanks

    • ANSWER:
      i don’t think there are any on the list that have any problems at all.

      i would recommend Scottrade if you want to invest in individual stocks/ETFs that don’t pay high dividends (Scottrade doesn’t let you re-invest your dividends, which is a significant disadvantage).

      if you want to go through mutual funds, I think E-Trade would be better. just make sure that whatever fund you want is available through your preferred broker.

28. QUESTION:
    what is a 401K plan and what is an IRA account and what is the difference?

    • ANSWER:
      A 401(k) plan is set up by your employer and you usually contribute by having a percentage of your pay deducted and automatically invested in the 401(k). Most have different investment selections, and you can choose how your money is invested. Some employers will match employee contributions up to a low percentage, say 5-6%, to encourage you to save. Money deducted for a 401(k) is taken out before payroll taxes are paid (except for Social Security). So it reduces your tax liability while you’re working, since you don’t pay taxes on any of the money, principal or interest, until you withdraw it.

      An IRA is an Individual Retirement Account that you open at the financial institution of your choice. It functions like a time certificate of deposit. You can choose the length of time, but you cannot use this money until you are 59 1/2 or you pay steep penalties. You have to keep rolling over the IRA, you just get to choose the time frame, based on the interest rate. Brokerage houses may also offer IRAs that work a little different, but I’m giving you the info for the standard bank IRA. The money that goes into it has already been taxed, but your interest is not taxed until you withdraw the money.

      I hope this helps you a little. Any good bank should be able to give you more info and explain in greater detail. Personally, if you have a choice, do the 401(k). You’ll make more money in the long run, even with the stock market woes of today. Good luck!

29. QUESTION:
    Can I buy bonds or CD’s with $$ from an IRA account w/o paying penalties?
    I have a small IRA that is not growing. What else can I do with the money that is already in there?

    • ANSWER:
      You could buy bonds inside the IRA … do not withdraw the money. Or, split the money between a bond mutual fund, and a couple of growth and income mutual funds. Over the long, long term this is the best strategy.

30. QUESTION:
    What is the difference between 401K and an IRA account? I need pros and con’s of both please?

    • ANSWER:
      401K is an employee sponsored program and an IRA is an individual account. both the 401k and the traditional IRA use pre-tax money. If you have a matching 401k program at work it is better than an IRA because that is free money. A Roth IRA is after-tax money and is actually better for you in the long run as the returns are tax free.

31. QUESTION:
    What are the tax consequences of withdrawing money from an IRA account to pay off other debt?

    • ANSWER:
      1. You have to pay taxes on the amount withdrawn.
      2. You will pay a 10% penalty for early withdrawl.

32. QUESTION:
    What is an IRA account? COuld somone give me a good website that teaches me waht an IRA account is?

    • ANSWER:
      You need to start by reading what the IRS says about an IRA, see below). From personal experience, if you don’t have an IRA account yet, I believe that it would be better to set up a ROTH IRA, but that is up to you and your needs.

      From the IRS site:

      An individual retirement arrangement, or IRA, is a personal savings plan which allows you to set aside money for retirement, while offering you tax advantages. You may be able to deduct some or all of your contributions to your IRA. Amounts in your IRA, including earnings, generally are not taxed until distributed to you. IRA’s cannot be owned jointly. However, any amounts remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.

      To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year and you, or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self–employment. In addition, taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.

      Compensation does not include earnings and profits from property, such as rental income, interest and dividend income or any amount received as pension or annuity income, or as deferred compensation.

      Please refer to Publication 590 for information on the amounts you will be eligible to contribute to your IRA account.

      If you, your spouse, or both of you are covered by a qualified retirement plan, your IRA deduction may be reduced or eliminated, depending on the amount of your Modified Adjusted Gross Income and your filing status.

      Figure your deduction using the worksheets in the Form 1040 Instructions or Form 1040A Instructions or in Publication 590. You cannot claim an IRA deduction on Form 1040EZ; you must use either Form 1040A (PDF) or Form 1040 (PDF). Form 8606 (PDF) should be attached to your return if any of your IRA contributions are not deductible. If both you and your spouse qualify, each of you may contribute to separate IRAs.

      The deadline for making a contribution to a traditional IRA for the year is the due date of your return, not including any extensions of time to file.

      You may choose to take the deduction on a return filed before the contribution is actually made, provided you make the contribution by the due date of that return, not including extensions.

      Amounts you withdraw from your IRA are fully or partially taxable in the year you withdraw them. If you made only deductible contributions, withdrawals are fully taxable. If you made any non–deductible contributions, withdrawals are partially taxable. Use Form 8606 to figure the taxable portion of withdrawals.

      Amounts you withdraw before you reach age 59 1/2 may be subject to a 10% additional tax. You also may owe an excise tax if you do not begin to withdraw minimum distribution amounts by April 1st of the year after you reach age 70 1/2. These additional taxes are figured and reported on Form 5329 (PDF). Refer to Form 5329 Instructions for exceptions to the additional taxes. For information on Roth IRA contributions or distributions, refer to Topic 309 and Topic 428. For information on conversions from a traditional IRA to a Roth IRA, refer to Publication 590.

      More information on IRAs, including information on tax–free transfers and rollovers, is available in Publication 590, Individual Retirement Arrangements (IRAs).

33. QUESTION:
    What is the minimal withdrawal required after age 70 1/2 for an IRA account holder?

    • ANSWER:
      You figure it out by how many years you expect to live, and divide it equally by the amt you have saved. That’s how much you take out.

34. QUESTION:
    What is an IRA account?
    What is an IRA account, and what is the difference between an IRA and a Roth IRA account? Can I open an IRA account on my own through my bank/credit union? Do I have to have a set amount to open one or can I open one with and add – a month? BTW, I can’t afford much more than that a month as I currently make less than 00 a month before taxes.

    • ANSWER:
      Don’t open an IRA at a bank. An Ira or Roth Ira just means it’s a tax-deferred account. You can invest in whatever you want.
      You are low income, so I suggest you contact a local Primerica Rep (look up online) and start investing in a mutual fund at ./m. that is the lowest I have ever heard of.

      IRA gets taken out of your income before taxes. So, if you make ,000/year, and you sock away ,000/year in your IRA, you will be (income) taxed on only ,000 of income. Roth is after tax income. Then, there is a difference for when you withdraw money.

      So if you have such little income, are you sure you can put $ away for retirement now? I mean, it’s a good idea, if you’re living with your parents, but can you live? Because there are big penalties if you take $ out before 59 1/2. Well, less with a Roth. But you will learn about it when you open the account. They will explain everything to you.
      Basically, a Roth IRA is a special type of account under US law that is generally not taxed, provided certain conditions are met. It allows a tax reduction on a limited amount of saving for retirement. The Roth IRA’s principal difference from most other tax advantaged retirement accounts is that, rather than granting a tax break for money placed into the account, the tax break is granted on the money withdrawn from the account during retirement. Also, there are fewer restrictions on the investments that can be made in the account than many other tax advantaged accounts, and this adds somewhat to the popularity, though the investment options available depends on the the place where the account is set up.

35. QUESTION:
    Help with opening an IRA account?
    I’m currently 18 years old and I want to open an IRA account. I was trying to compare banks with the highest interest rates and benefits but got lost in all the types of accounts there were.

    What the difference between Traditional and Roth accounts?
    Which one would benefit me more?
    Is Bank of America better or Wachovia better for IRA accounts?

    I’m just really….lost. =[

    • ANSWER:
      Okay, so you had a W-2 last year and you want to do an IRA. Good for you.

      If your income was less than 50, you won’t get a tax benefit from deducting the IRA contribution because you wouldn’t owe tax anyway. Thus I’d put this money into a ROTH. Even if you made more than 50, the next 00 is taxed at 10%, so I’d almost still say Roth (these are not deductible).

      The trade off is that when you take the money out of a traditional IRA, you are subject to the tax bracket you are in at the time. If you are younger than 59.5 years, this would *also* be subject to a 10% penalty.

      Roth money has to sit for 5 years before you avoid a penalty, but then when you do, you get to take your contributions first. Since these were after tax, there is no additional tax. (Earnings get taxed as both income and as an early withdrawal.)

      That said, there is an interesting phenom. It applies more for adults in their 30s. Let’s say I’d put 00 a year into an IRA for 5 years. If I’m in the 25% tax bracket, I really only had to come up with 00 each year. Then I lose my job and decide to go back to school for another degree.

      I could, if I timed this well, not work (or work part time) and take some of the money out. Because the money is for school, it’s not hit with the 10% penalty. It is subject to income tax, but if I’m over 24 and don’t work, the first 50 isn’t taxed at all and the next 00 is at 10% (remember, I put this in at 25%), plus I’m still eligible for an education credit. Voila, pseudo-income averaging.

36. QUESTION:
    RIFF (Canadian retirement account) to an IRA?
    Are you allowed to transfer a RIFF to an IRA account? If so, what are the consequences for doing to if any? If you can not, what are the tax consequences for liquidating your RIFF and depositing to an IRA account? Tough question, I know.

    Thank you,

    • ANSWER:
      I think you mean RRIF.

      No it cannot be transfered.

      Liquidating the RRIF triggers income tax on the entire amount.

      As well, you can only deposit up to a certain amount each year to an IRA. There are no rollover provisions for funds coming from Canada.

      Read this:

      http://blog.taxresource.ca/rrsps-moving-to-the-us/

37. QUESTION:
    what options are available when you invest in an IRA account?

    • ANSWER:
      Almost too many to cover here.

      Type in IRA in your favorite search engine and you’ll see how many options come up.

      In my personal opinion, your best bet for growth is a good mutual fund. Just make sure when you open the account that you are opening a qualified IRA or you won’t get the tax breaks. Try Fidelity or TRowe Price. Both have some pretty good options. Or if you want to go through a broker, Scottrade or Ameritrade.

38. QUESTION:
    What company is the best for opening up a Roth IRA account?
    I am 19 and looking into opening an account. Which company is the most reliable?

    • ANSWER:
      For someone just beginning an IRA, a mutual fund company is a very good option. There are 3 or 4 that have a wide variety of mutual funds, low expense ratios, and generally very good funds. I do not have any trouble at all recommending any of these.

      T Rowe Price
      Fidelity
      Vanguard
      American Funds (this company has a 5.75% front end load but also has excellent funds, low expense ratios, and a very low minimum investment amount)

      They are all on the internet so you can go to their sites and check out their offerings and track records.

39. QUESTION:
    Opening an IRA Account?
    My mother is 62 and she is choosing to go with an early retirement. She received a paper from her 401k place and they want to know what she is plan on doing with her 401k funds. She first wanted to get the lump sum money, but i guess there are fees associated with that. I am thinking about rolling over her funds from 401k to an IRA account. Should i go with Roth IRA? also, can we just go to a bank and sign up for an account or is there another place anyone might recommend? thank you

    • ANSWER:
      She would have to roll her money into a traditional rollover IRA, not a Roth. Because her money was in a tax-defered retirement account, it has to stay in a tax-deferred account. The Roth IRA is after-tax money that grows tax free.

      Since she is over 59 1/2, she can also start to receive disbursments for the account if she wants to.

      I would recommend she open the account at a bank or brokerage that gives her some decent invesment options at a low cost. Once it is in the IRA, dont put it in a CD or money market fund – rates are too low. She may also want to look at putting it in a tax-deferred annuity.

40. QUESTION:
    In Florida, does an IRA account disqualify you to receive Food Stamps? If so, what is the limit allowed in acc?

    • ANSWER:
      foodstamps are for poor people that have no resources left they will not give them to you if you can get money out of an account . so go take money out of your ira and buy you some food then apply when that is all gone,,,,

41. QUESTION:
    i deposited 2000.00 for 2 years into an IRA account which gave me no tax benefits.?
    i heard that i can with draw this money with no peniltys or taxes since there were already paid. i however dont remember what years i deposited this money or if my tax person who is no longer in business sent in a 8606. i contacted a broker where the money is and there records only go back 7 years. what can i do ?

    • ANSWER:
      Any true “IRA” cannot be tapped before retirement without paying a penalty, usually 20% plus another 10% early withdrawal fee, payable to our loving IRS.

      Youy can roll over some investments into other funds and not pay taxes, but you will need to talk to the company that you wish to roll over the funds to.

      I might be prejudice, but I LOVE Fidelity Investments because they make it so easy to roll over and they actually have a website that works accurately almost all the time, unlike my Bank of America website that always has problems….day and night.

      If this is a ROTH IRA, then than means taxes were collected out out your normal income and you did not take a tax deduction for your contributions. In that case, the entire amount is not taxable, only the earnings.

      If this was a traditional IRA and you didn’t claim the deduction, you might consider filing a 1040X to claim those deductions. ,000 a year for two years could easily get you 0 or more off your taxes (based on 0 for each ,000 you could take on an IRA deduction from your earned income)

      In any case, no matter what, unless I am retiring now, I would look for methods to roll-over tax free.

42. QUESTION:
    Is a severance check from a company that you’ve retired from the same as an IRA payment?
    I retired from SBC 3 years ago. I received a severance check to leave the company. I moved it into a money market. I was told at that time I was allowed to take out up to 30,000 as income and not be penalized on my taxes. When I got my taxes done the money I did take out was treated like it was in and IRA account. What is the difference in the two accounts.

    • ANSWER:
      I had a partner retire from SBC a few years back, so I think I know what you are talking about.

      You need to investigate what TYPE of income this was. “Severance” is taxed as WAGES. It is reported on your W2 and taxes are withheld at the source.

      You might have taken a “lump sum” payment from your pension fund. This would be taxed as PENSIONS, and reported on Form 1099-R, with taxes possibly withheld at the source.

      I would suggest that you seek the assistance of a tax professional to help you sort out this matter.

      William Perez
      taxes.about.com

43. QUESTION:
    Just realized I made an ineligible IRA deduction last year?
    I opened an Ameritrade account last year before filing my taxes and made a 00 contribution. I thought I was opening a traditional IRA account. But when trying to make another contribution this year, I realized it was in fact not an IRA account. I might have made an error filling out the form. I claimed a 00 deduction last year on my tax returns which is obviously ineligible. What is the right course of action now?

    • ANSWER:
      You’ll have to file an amended return. Enjoy.
      Double check with Ameritrade to make sure this is not an IRA that you opened first.
      Are you 100% positive. 1,000% positive?

      Mistakes are so darn easy to make.
      Don’t feel at all bad about this…

44. QUESTION:
    How early can I open an IRA account?
    I’m a young person, and I’ve been reading an older book on financial advice. Basically the book shows a quick chart on how if you were to invest 2,000$ a year from the age of 22 to 28, at the age of 62 you will have 533,225$. So I figure if I start now (I’m 18) then I could invest 2,000 a year into an IRA account until I I’m 28 and my gains would be much much higher. But the book never actually says what an IRA account is or how early you can start one. Or for that matter what would be the best thing for me (a young person) to start investing in for the future. Thanks in advance, I’m just trying to get started as early as I can as far as money goes!

    • ANSWER:
      If you have earned income (such as wages from a job) then that amount can be invested into an IRA.
      A simple way to open an IRA is:

45. QUESTION:
    Question about minimum distribution on an IRA beneficiary account?
    Hi. I posted earlier about my cousin who is a beneficiary to an IRA account after my aunt (her mother) died.
    Here’s some background info, then I want to ask a question. First, the background info:

    This account basically is based on the stock market; the value of it goes up or down depending on what the stock market looks like. Lately, it’s been looking pretty good. The value of it right now is about ,000.

    My cousin has opted for minimum distribution. She originally wanted to take out a portion every year for the next 5 years and then close the account and withdraw all funds available at that time. However, that would mean paying BIG TAX BUCKS on that money (since it’s counted as income).

    She “dipped” into it about 3 months ago. It wasn’t much…..it was only 00. After distributing a little to Federal and a little to State, they cut her a check for 0. She wants to “dip into” it again before 2012 is over and take out maybe 00.

    Here are the questions:
    1) How much do you think she should distribute to taxes when she requests that 00 be taken out?
    2) How do we know what tax bracket she’s in? (She is married, no kids, just she and her husband).
    3) And, when she receives her 1099 to report taxes for 2011, is it correct to conclude that since she already withheld a percentage of those 00 and of the 00, that helps in not having to pay so much as if taxes were never withheld, correct?

    Thank you for your time!

    • ANSWER:
      To answer all your questions, go to the right top of this page.
      Type in (ira beneficiary distribution options) then click on to
      web search that will give you a few sites to go to. Click on to.
      “eHow money”

46. QUESTION:
    how to claim loss on my tranditional ira account ?
    I have trade some stocks in my traditional ira account in 2007 and have some short term gain. I am also holding a stock for a few years and still a loss in my ira account- I am planning to sell it. Do I have to sell it same year to net out my gain in my portfolio ? what is the tax rate for capital gain in ira account ?

    • ANSWER:
      Gains and losses within an IRA have no tax consequences and aren’t reported. When you withdraw money, the amount withdrawn is taxed as ordinary income to you.

47. QUESTION:
    What percent, if any, of my IRA account can I expect to be required to pay for college?
    I would like to start an IRA with the money I have now, but I don’t know if colleges would make me take money out of that to pay for tuition. I would appreciate it if you would also explain IRAs in detail. Thanks!

    • ANSWER:
      Once you put money in your IRA its not meant to be taken out. However you can take your contributions out if you need it at anytime without penalty. Here’s an article that explains a little more, hope this helps.

48. QUESTION:
    what is the best ira account to start ?
    I’m planning to shop around for a bank that has the best ira account? do you guys know any good places.

    • ANSWER:
      I use Charles Schwab. You can invest in just about anything you please with a discount broker.

49. QUESTION:
    Is there a penalty for doing a white wash sales on Roth IRA account?
    I was going over my Roth IRA account and came across several white wash sales for tax year 2009 which I forgot to account. What is the tax consequence, if any?? What is the penalty and interest charge for each tax year that you have to redo 1040X. Please reply. Thanks. I like the Tax Lady comments.

    • ANSWER:
      If you bought and sold within the Roth, the wash sales are meaningless. The accounting for a Roth is when you take the money out.

      If you sold stock for a loss outside the Roth and bought the stock within the Roth, you *do* trigger the wash sale rules (can’t claim the loss), BUT you can’t add it to your basis in the Roth.

50. QUESTION:
    what are the benefits to having an IRA account?

    • ANSWER:
      If its a traditional IRA, your contributions grow tax-deferred, meaning you earn more through tax-deferred compounding.

      A Roth IRA is better. It grows tax-free earnings, withdrawals can begin at age 59 1/2 having owned it for 5 taxable years, and you can borrow against the principal at any time. Unlike a traditional, you never have to take a required minimum distribution.