Start A Roth IRA
One of the hot retirement topics today is
the Roth IRA. As a new option for retirement planning, there are still many people who don't know the basic details about the Roth IRA. This article will give you at least a basic understanding of the Roth
IRA and a later column will deal with how the Roth IRA can impact your overall retirement strategy. The Roth IRA allows you to contribute fully taxed income (money
the government has already received taxes against) to a retirement account where you will never pay taxes against any of the gains or withdrawals from your Roth IRA account as long as you meet all the withdrawal
requirements. The amount you can contribute to a Roth IRA is set on a sliding scale where after a certain income level you can not contribute to a Roth IRA. There are some limitations to your maximum
contribution depending on your modified AGI. Depending on your specific tax situation and your long range retirement planning, it is recommended that you check with your tax advisor before doing anything. In
general the contribution rules are as follows: if you are single and your modified AGI ("MAGI") is less than $95,000, you may contribute the full $2,000. If your MAGI is in between $95,000 and $110,000,
your maximum contribution is gradually reduced. For MAGI of $110,000 and above you can not contribute to a Roth IRA. For a married couple, if your modified AGI ("MAGI") is less than $150,000, you
may contribute the full $2,000. If your MAGI is in between $150,000 and $160,000, your maximum contribution is gradually reduced. For MAGI of $160,000 and above you can not contribute to a Roth IRA. You
can invest the money in your Roth IRA as you wish. You can invest in stocks, mutual funds, and bonds, for example. There are a number of investment vehicles to choose from and you will need to determine
which are best for you depending on your level of risk and investment time horizon. Check with your financial planner or tax expert for advice. If you are willing to do your own research and make your own investment
decisions, the best and easiest way to set up a Roth IRA account is open one at a brokerage firm such as TD Waterhouse or Charles Schwab. Both companies offer off-line and online services through their toll-free
number and web site. Although any reputable brokerage firm will do, I mentioned TD Waterhouse and Schwab because I currently have accounts there and I am happy with their service. TD Waterhouse ( www.waterhouse.com/
(800) 934-4448) offers Roth IRAs that have NO fee to open the account and they don't charge an annual maintenance fee, but you will pay a minimal purchase/sale transaction fee on some investment products. Additionally, there is no minimum balance requirements and you can invest in everything from stocks to bond funds. There is also some general information about retirement planning available to read on the site.
Charles Schwab ( www.schwab.com/
(800) 435-4000) also offers many different investment options and has very good research information available for free on their web site. However, you may be charged a fee if you don't meet the minimum account balance requirements. Although Schwab may charge more fees, I believe their web site is a wealth of information with some good research tools, especially if you prefer to do your own research.
I recommend you check out different brokerage web sites and look at what they have to offer in regards to services, research, tools, investment choices and service charges before you make a decision. As you may
already know, for 1999 tax year, your contribution must be made by the due date of your tax filing. In most cases that means April 17, 2000. I recommend you avoid the last minute rush and plan to open your
account earlier rather than later. Planning now will allow you the opportunity to check out various investments you might want to put your money into and to check out different brokerage firms to open your Roth
IRA with.
2/6/00 |
