| best place to open a Roth IRA and some other questions |
|
|
|
|
|
sam1000
Full Member
Cash: $ 21.05
Posts: 95
Joined: 28 Jul 2005
|
| best place to open a Roth IRA and some other questions |
 |
|
Which is a good place to open a Roth IRA...i'm looking for some place with no setup fees, no minimums and no termination fees and that allows me to invest in all available mutual funds and stocks.
I looked at Fidelity and they want a $2500 minimum to start and if I choose a $250/mo. automatic payment options (which waives the minimum requirement) I'm not allowed to invest in non-Fidelity funds  I called Fidelity and the representative didn't know all the rules very well 
I'm looking at Scottrade as an alternative. Opinions?
Another question is that per my income I can contribute $400 max to an Roth IRA this year so I plan to do that, and put the rest in a non-deductible IRA. Next year and thereafter if I max out my 401k I can put in $2200 or so in the Roth and the rest in a non-deductible IRA.
Using the rules that allow "high income" filers which becomes effective 2010 I plan to convert the non deductible to a Roth at that time and combine the two Roth accounts. This is my plan, any drawbacks to this?
Thanks so much for any advice 
|
Sat Nov 11, 2006 11:07 pm |
|
|
efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
|
|
|
|
There is an annual limit for the sum of all types of IRA contributions. 401(k) contributions do not count against that, other than reducing or eliminating deductability of IRA contributions.
So if income rules limit him to $400 Roth IRA contribution, he could make a $3600 "non-deductable" contribution to a traditional IRA (+$1000 age 50 or later). I am not sure who would even open a Roth IRA for $400, but if opened after Jan 1, 2007, he could combine 2006 and 2007 tax year contributions.
Taxable contributions to a regular IRA can be complicated (an understatement). Keep accurate records "forever" for any taxable contributions to a regular IRA until fully distributed or converted. That needs to be accounted for (pro-rated) during withdrawls or Roth conversions to avoid double taxation. For details search "form 8606" on http://www.irs.gov/
When the time comes for Roth conversion, make sure you cover tax for any tax deferred portion (gains in your case) from outside of the conversion (W-4 adjustment or estimated tax payments if necessary), and specifically tell them NOT to withhold tax from the conversion. Withholding from the converted amount itself would be subject to tax/penalty on the pro-rated tax deferred portion and would reduce the total that would compound tax free in the Roth.
Just hope that the Democrats to not "rollback tax cuts" like they said they would do (did anyone misinterpret that as rolling back taxes), or repeal other retirement plan extensions (like the special 2010 conversions).
|
|
Sun Nov 12, 2006 5:59 pm |
|
|
sam1000
Full Member
Cash: $ 21.05
Posts: 95
Joined: 28 Jul 2005
|
thanks
yeah, whether the Democrats are going to let the current tax situation to expire in 2010 is of concern to me as well. We just have to hope for the best.
I know $400 is not much but it's either that or I lose the contribution for tax year 2006. I will put away $3600 in a traditional IRA as well. I realize if the conversion cap is repealed in 2010 then I will be stuck with a traditional IRA and will have to pay ordinary income tax at retirement on my gains which really makes it a very lousy choice since I could've paid 15% capital gains on a regular investment account
Just a clarification, I do have until April 17, 2007 to open and fund IRAs for tax year 2006 correct?
|
|
Mon Nov 13, 2006 7:39 pm |
|
|
BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
|
I believe 4/16 is Patriots Day in several eastern states, if I remember correctly... but if your state hasn't declared Patriots Day a state holiday, 4/16 is your deadline...
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
|
|
Tue Nov 14, 2006 3:11 pm |
|
|
|
