You should be able to transfer funds very quickly within the Scwab family (savings/checking to investment account). I’m not familiar with the details, but most firms allow instantaneous, or nearly instantaneous, money transfers. You may wish to call them for more details before opening your account: 1-866-232-9890.

For other money transfers, it depends on who you use and how you do the trade. In most cases you have to actually have cash in hand before you can make a trade, which can take 2-3 business days for electronic transfers (in rare cases one or two days longer). Sending in a paper check can take even longer than that because it has to clear.

Is there a reason (fees, etc) that you didn’t include Charles Schwab in your list of discount brokerages? I don’t want fees but don’t mind saving up for a minimum since I’m going to be doing that with Vanguard anyways.

The reason I ask is that I’m a big fan of their checking accounts which provide free ATM fee reimbursals which will come in handy when I travel. I was hoping that it would make transferring funds easier, somewhat like ING has with Sharebuilder. As a side note, do you know how long it would take otherwise to transfer funds?

Thanks!
Michelle

1. Regarding the Roth IRA conversion: you can convert your 401k directly into a Roth IRA and pay the taxes based on 2010 income, or you can spread it out evenly and pay the taxes in 2011 and 2012 income. You would pay 50% of the tax in each year, and it will be based on that year’s income. Since you will be a grad student your income will probably be relatively low, potentially decreasing your tax bill if you were to pay it today. So it’s probably a good idea to spread out your tax bill over the next couple years.

2. The fees that John Hancock would charge would be the maintenance fees for your 401k plan because your company would no longer be sponsoring it. They probably have a provision that would allow you to convert your 401k into an IRA and you would then pay any associated fees for managing your IRA, if there are any fees. Most major brokerage houses don’t have any fees if you have a minimum amount of money with them, so you would probably be OK. That said, you can’t go wrong with either Vanguard or Fidelity, so look into those places and determine which firm has the best investment options for your needs.

Best of luck!

But, there are middle grounds to the extremes listed above. For example, if you have reasonable fixed rate student loans, then you may find the payments to be fairly easy to handle. And if the interest rate is low enough, you may be able to make greater returns on your investments than you could if you were repaying fixed rate loans. For example, I have a friend with a fixed rate student loan at 2% interest. He is making the minimum payments on his loans and investing his extra cash flow (he has had these loans going on 10 years now). You might not get a 2% interest rate, but you may be able to defer your loans or get a low enough interest rate that investing will pay off in your favor.

You can also consider contributing to the Roth IRA and making withdrawals of the contributions (not gains on contributions) at a later date if you absolutely need the money. However, be sure you understand the Roth IRA Withdrawal Rules so you don’t get hit with taxes and penalties.

Balancing debt and investing can be a tricky endeavor and there is no one-size-fits-all approach. A lot of this will come down to your risk tolerance and willingness to stash away some cash for your future. I wish you the best of luck with your decision!

I am a 22 year old college student currently on a 6 month co-op. I pushed back my graduation due to the lagging economy, and thus, I will be graduating in spring of 2011. After reading your EXCELLENT information along with the informative comments from others, I want to consider opening a STAR Fund with Vanguard. I wish I had opened one sooner in my teens. My question to you is: Should I do this? I’m earning money at my co-op right now that I could be putting into a Roth IRA, but I don’t know if I should do this since I will need to pay off student loans once I am out of school. Also, I may try to go straight to Graduate school depending on whether the economy turns around in the next year or two, so that would be even more student loans. What are your thoughts on this? Should I go ahead and open a Roth IRA, or should I wait and make sure I am debt free (no student loans to pay off, etc.) first and then proceed? Thanks!