Comments on: Roth IRA Versus Traditional – Which is Better?

By: clara

clara — Mon, 02 Nov 2009 10:38:24 +0000

I am not quite 59 1/2, and plan to retire at 62 or 63. I am trying to determine if my understanding is correct and which IRA I should choose. Am I correct that you have to leave your money in a Roth Ira for five years (from contribution) to be able to withdraw it (even partially) without penalty? If so, I don’t necessarily want that one. If I decide to go with a traditional IRA, I believe an earlier blogg said the benefit is that you would contribute tax free now, but how does that work…does your employer somehow get involved, or does the tax benefit come off at the time you calculate your taxes for April 15th…sorry, so uneducated on this…(I really hope the later, don’t want employer knowledge of what/how much I want to add to an IRA) as employer contributes to a (non-employee contributed) retirement plan. (Also, am I correct in thinking a traditional IRA, if you calculate the tax savings at the time you prepare your tax return, it has nothing to do with whether you itemize or not, right???). Thanks for educating me on these issues…

By: Patrick

Patrick — Thu, 15 Oct 2009 00:02:12 +0000

Tiffany, there are better options for investing for college, such as a 529 College Savings Plan, or a Coverdell Educational Savings Account (ESA). You can compare the two plans here: 529 College Savings Plan vs. Coverdell ESA. One of the best 529 plans is the College Advantage 529 Plan, which anyone can open, not just OH residents. There is also a bonus for new accounts, which you can read about here: Free Money - Ohio College Advantage 529 Plan.

By: TIFFANY

TIFFANY — Wed, 14 Oct 2009 21:10:52 +0000

When I went to college we were told that the Roth IRA was the way to invest for college. My son is ten years old and I’d like to start a “college fund” now for him. Will his money be tied up until he’s 59 1/2 or is there even a penalty for early withdrawal?

By: BioJoe

BioJoe — Wed, 07 Oct 2009 14:28:30 +0000

Hey Hey lots of good qeustions here. I will be jumpin in now and then. I have some knowledge on IRAs, 401ks, and some on prospectuses, mutual funds. To Tiffanie…..you can convert IRAs back and forth but there are some implications. I have to pull out my notes on the conversions. I remember one way was better than the other. You can also call any investment firm and they will tell you which is allowed and the adv/disadvantages plus you get the benefit of learning the invesment jargon, lol. Tip of the day/month or, cause I feel tippy!!!!……When rolling over a 401K (due to loss of job…etc) ALWAYS!! transfer those assest to the new institution/firm. NEVER have the check sent to you…trust me you will have more paperwork and headaches to deal with depending on which institution/firm and which idiot in the cubicle you get!!!

By: Patrick

Patrick — Wed, 23 Sep 2009 19:02:38 +0000

Paul, Here is a recent article about Where to Open a Roth IRA Account. Not all of these companies offer a SEP IRA, but I believe Vanguard and Fidelity offer self-employed retirement plans, including SEP IRAs. I'm sorry, but can't offer advice on which funds or investments to go with. Best of luck!

By: paul

paul — Wed, 23 Sep 2009 18:55:10 +0000

i have to open a sep ira any advise to witch bank to go to and what to invest in thanks

By: Patrick

Patrick — Mon, 31 Aug 2009 12:21:56 +0000

I’m not sure about the income situation when you file separately. But you should be able to consolidate your IRA accounts. Your bank should give you a simple form to fill out that will allow them to transfer your old IRAs into one account. You should be able to transfer the funds directly from one IRA to another, but if one of your old IRA accounts sends you a check when you close your account you will need to deposit it into an IRA immediately to avoid early withdrawal penalties.

By: Sandy

Sandy — Mon, 31 Aug 2009 11:36:39 +0000

I am married but have filed and will file next year as married filing separately. I do not earn more than 95,000 but together with my husband we would be over the 150,000. Can I still open a Roth IRA under my name?
I have one IRA account and another Roth IRA (with minimum amounts). I would like to consolidate them all into a Roth IRA in the same bank. Is this possible? If so, I would just go to the bank and ask them to do so?
Thank you

By: Patrick

Patrick — Wed, 22 Jul 2009 14:43:14 +0000

Mike, This should help you with your decision on your old 401k: Deciding What to Do With Your 401(k ) When You Change Jobs.

Regarding over contributing to a Roth – There may be penalties involved if you contribute too much money, so I would consult an accountant or financial planner for more information on that one. Remember, you have until April 15 of the following year to contribute, so in the mean time, you may consider saving the amount you would normally contribute to a Roth in a high yield savings account. That way you are earning interest and can invest the full amount if you are eligible.

By: Mike

Mike — Wed, 22 Jul 2009 14:34:01 +0000

Great info – I have a couple other questions…..here’s some background.

I’m currently participating in (and maxing out my contributions in $$) into my existing employers 401k. I have a ROTH IRA open and want to continue to contribute there, and I have an OLD 401K, still in an ex-employers plan.

What to do with the OLD 401k? Should I roll it into a traditonal IRA or my current employers plan? Advantages/Disadvantages? If this plan contains a high percentage of that companies stock (which has decreased significantly), should I wait until it comes back a bit (it’s showing signs) before rolling it over?

For my ROTH IRA, I am approaching the cutoff limit based on me and my spouses combined salaries. I understand that you use an adjusted gross income to make that calcualtion – so is that basically our nets combined, minus what we contribute (pre-tax) into our 401k’s (and any other allowable deductions)? If I OVER contribute, what happens?

Mike