• Posts Tagged ‘roth ira’

    Roth IRA – My First Investment Account

    by  • March 27, 2012 • Tagged: ,  • Comments

    Source: goodfinancialcents.com via Jeff on Pinterest

    We’ve joined over 140 other bloggers to promote the Roth IRA Movement. Thank Illinois Certified Financial Planner Jeff Rose for this awesome idea!

    How We Found Out About Roth IRAs

    According to my statements, my Roth IRA was opened in 1996. I was in high school at the time and got into a good amount of trouble for a teenager, so I was grounded a lot. Some of those Friday nights were spent with my mom, aimlessly flipping through channels for something to watch. One night, we came across a show on finances, with a host being a fiery woman with the name that wounds like MOVIE DOORMAN. It was she who introduced our family to the Roth IRA.

    We completely bought into the numbers that the financial personality was throwing at us: if we contributed the maximum amount (which back then was $2,000) for a few years, then by the time I was to retire I’d have a GAJILLION DOLLARS for me to by a private island and retire. She didn’t say exactly how the money would multiply, but that didn’t matter to us. So my mom opened up an account for me and put in $2,000. She gave me free reign as to what I could do with it.

    I didn’t have a single clue as to what I should have done. So I did what any slacker teenager would do: Nothing.

    Getting Started With My Roth IRA

    Fast forward a few years and my mom had contributed an additional $500, while I did nothing. She called me one summer day when I was in college, and told me to pick some investments. I logged into the investment brokerage, and I stared at the screen. I. Knew. Nothing. So I did what any Generation Y/Millenial would do: I called the customer service hotline for help.

    When I was connected with the rep I told him the history of the account and that I had no idea what I was doing. The guy was nice enough to stay on the phone with me for about an hour while he explained the basics of mutual fund investing – large caps vs small caps, stocks vs bonds, mutual funds. I am supremely grateful that he spent so much time with clueless me. Honestly, I don’t know if what that guy did was even legal.

    When I got off the phone, armed with the very basic knowledge that I could obtain about investing, I went and made my first investments: ASCVX (which was originally owned by the bank I was with at the time) and FSLCX. Woo!

    My Roth IRA Today

    While those weren’t the brightest of investments, it got me started. The promise of a GAJILLION DOLLARS by the time I retired was again being pursued. Over the years in my Roth IRA I owned individual stocks of GE, CVS, and AMD, along with some other winners and losers.

    Today, my Roth IRA is a part of a comprehensive family retirement investment portfolio. While I haven’t updated our list of holdings in our Roth IRAs since 2007, they do still have the same investments in them – a REIT and a bond fund, both which round out our portfolio.

    Looking to the Future

    We’ve unfortunately not contributed to our Roth IRAs in a few years as we’ve increased the amounts we put in our employer-sponsored retirement plans. We would like to change this in the future as tax-free growth is something that we should be taking advantage of and we would like to remain tax-diversified.

    One future possibility for our Roth IRA is to help fund a first/investment home purchase. Current regulations allow us a lifetime withdraw limit of up to $10,000 for the purchase of a first time home. If we both did this, then we’d have $20,000 in real estate, or about 17% of our portfolio. It’s a fantastic benefit of having a Roth IRA, but we must weigh all the options to see if it is right for us.

    Do you have a Roth IRA? How have you used it in your life?

    Financial Goals for 2009

    by  • January 19, 2009 • Tagged: , , , , ,  • Comments

    While we are already pretty well into 2009, it isn’t too late for us to officially declare our 2009 financial goals. We’re now married, so our financial priorities have changed accordingly…and they happen to be house and baby, not necessarily in that order and probably not for at least a year from now. That said, 2009 is going to be a year of heavy financial preparation. Here’s what we’re setting out to accomplish:

    Pay off student loans that have been transferred to 0% balance transfer (BT) cards

    In late 2008 both Her and I opened 0% BT credit cards for the purpose of paying off the remainder of the private student loans. The total amount was a little over $13,000, and we started making payments in December 2008. The cards’ BT rate expiration dates are this year in September and December. Therefore, we’re going to pay off the cards in order of BT rate expiration. We’re allocating $1,000 per month towards paying off those cards. That way, we should be making our last payment in December 2009.

    While we’re paying these off we’re paying the minimums, about $400 total, towards the other student loans that aren’t at 0%.

    That brings us to a total of ~$1,400 per month for student loan payments. Ouch.

    Stretch goal: pay off half of the student loan on the 1.9% BT, about $4,000

    Save $15,000 for a down payment for a house

    We’ve written a lot of posts on our ideas on housing. Summary: we want to buy, but haven’t had any money so we’ve rented and get a great deal, now we’re saving, but have no idea where or when we’re buying, but no suburbs, please.

    Of the above summary, the most tangible thing we can do to move forward with our housing decision is to save, save, and save. We’re socking away $300 per paycheck into savings with automatic deposits.

    Stretch goal: Save $20,000. This is entirely possible, but with the way the economy is going we’re not going to get our hopes up.

    Contribute the maximum to our Roth IRAs, $10,000 total

    …this of course assumes that we will be able to contribute to Roth IRAs. We’re actually going to start this in April when our taxes have been all sorted out, and contribute until April of 2010. Our monthly contributions to our Roth IRAs will amount to $833.33.

    Stretch goal: Be comfortable with our cash flow so that we can increase our 401(k)/SIMPLE IRA contributions at work by at least 1%. Alternatively, we can also put money into a Self-Employed 401(k), starting out with 5% of our business income.

    I’ll check in with these goals every quarter to see how we’re doing. How are your goals shaping up for this year?

    Happy 2nd Birthday, Make Love, Not Debt (With Roundup Included!)

    by  • January 3, 2008 • Tagged: , , , ,  • Comments

    candle2.jpg
    photo: LensENVY

    On January 1, Make Love, Not Debt had its 2nd blogoversary! I really can’t believe that this project took off the way that it did. I couldn’t have done it without all of you, the readers and pfblogosphere!

    Here are some posts that are pretty interesting:

    2 Million is finding out the difficulties of managing cash flow as a newlywed. Her and I have had our finances intertwined for almost 3 years and we’re still figuring it out.

    Lazy Man has posted his alternative monthly income status report. He raked in an incredible $2,200+, mostly from his blog income!

    Money and Values asks if you go the long way to avoid tolls. We dont – in Chicago tolls aren’t too expensive and we hardly drive. Plus, with the addition of open road tolling we just bite the bullet and go the toll routes.

    eFipo tells how he splurges on the big nights, with a good story from his New Year’s celebrations. We tend to do a lot of small things since we’ve found many cheap forms of entertainment.

    Five Cent Nickel answers a reader question on Roth IRA limits being reached after marriage. This is of particular interest since Her and I will be tying the knot this year, and pay raises may put us close to the income limit.

    We’re in Debt muses: when can you have too much credit? Interesting that they ask, since we’re still wondering what to do with all of our credit cards with no balances.

    Our 2007 Goals Status, Part 1: Contribute 50% to Roth IRAs

    by  • December 5, 2007 • Tagged: , ,  • Comments

    About a year ago we made some financial goals for ourselves. Since 2007 is coming to a rapid close, I thought we’d look at those goals and see how we did, and how we made it happen. I’m going to tackle them out of order just because that’s how I feel like writing about them.

    The first goal I’m going to examine is contributing 50% of the maximum allowed amount to our Roth IRAs. As the 2007 Roth IRA maximum contribution amount is $4,000, that amount is also equal to 50% of total contributions for both of our accounts. When we first came up with this goal, Her’s Roth IRA had a paltry $1,695.85 in it, so we decided to allocate all of our contributions to her Roth IRA account to bring it up to about where mine is.

    Last year, Her moved her Roth IRA holdings from Merrill Lynch to Vanguard. At the beginning of the year, she requested automatic deductions twice a month to total $4,000. Since I am paid twice a month, we had it coincide with my paydays, so it was like an automatic payroll deduction in that we never even saw that money. Easy as pie. (Except that I’ve never baked one [but Her has]).

    Status: Will be completed this month.

    Should We Diversify Brokerages?

    by  • March 26, 2007 • Tagged: , ,  • Comments

    Our retirement holdings will soon be with three different brokerage companies. Her’s 401(k) is stuck with who manages it for her company, but the Roth IRAs can all be moved from one brokerage to another. The question is, why would we want to?

    I bring up this question because I’m in the process of moving my SIMPLE IRA (here’s why I’m doing this) to Vanguard. Her’s Roth IRA is at Vanguard, mine is at Fidelity. I originally wanted to move my SIMPLE IRA to Fidelity to have all of my accounts in once place, but they don’t allow “orphan” (just me, not my whole company) SIMPLE IRA accounts. After a little research, I found out that Vanguard, T. Rowe Price, and Schwab all allow orphaned accounts. Since Her’s Roth IRA is already with Vanguard, I decided to keep everything streamlined and go with them. I never even considered other places to move my SIMPLE IRA such as a discount broker.

    The main reasons I decided to move money over to Vanguard is that I wanted to take advantage of their low-cost index funds and simplify our financial lives. I can’t help but wonder, is the grass greener on the other side? Am I missing out on anything by keeping our retirement funds in only a few places? What reasons would I want to have multiple brokerages?

    Should We Even Have Our Retirement Accounts?

    by  • October 9, 2006 • Tagged: ,  • Comments

    If you’ve looked at any of our net worth statements, you’ve seen that we have four retirement accounts between the two of us. Only two of these accounts, the employee sponsored ones, are actively being funded right now. If you don’t want to read my long-winded analysis of our accounts, scroll to the bottom to see where this is all going. Here’s a breakdown and a little history of our accounts.

    His Roth IRA
    My mother caught wind of the Suze Orman show sometime when I was in college. She dug up some resources and really didn’t understand them, but the seed was planted. The notion was too good to be true – that putting $2,000 (the contribution limit at the time) into a Roth IRA for a few years, then letting it grow so that by the time I retired I’d have a million bucks. My parents opened up a Roth IRA account for me with Fidelity and fully funded it for my 19th birthday. For my 20th and 21st birthdays, they also funded it. It was my job to figure out how to invest so that I would retire comfortably. I’ve had some good luck with my investments so far, but I’ll be looking to change my investment strategy soon (more on that in a later post). Since the initial contributions by my parents, no other contributions have been made.

    His SIMPLE IRA
    A SIMPLE IRA (Savings Incentive Match Plan for Employees of Small Employers) is a retirement plan for small employees where pre-tax dollars are put into a retirement account. These work pretty much just like 401(k)’s, (of which there is a SIMPLE 401(k) variant – here’s a comparison between the two) except for a few differences. Unlike traditional 401(k)’s there is no vesting schedule that can be applied; employers have to match employee contributions up to 3%, but no more, unlike the 401(k) maximum of 25%; and you cannot “loan” yourself money to be paid back from a SIMPLE IRA. Because of our current financial situation, I only contribute 3% – enough to get the maximum employee match, for a total of the equivalent of 6% of my salary.

    His HSA
    I don’t really consider this a retirement account. Here was my overview of this account a few months ago.

    Her Roth IRA
    When my mother was telling me about Roth IRA’s, I also put the bug in Her ear that she had to open one as well. And that she did – with student loan money. She’s had some success with her investments as well, but trouble with the company that she held it with. Like me, she opened this account before either of us knew what the hell we were doing. Since the account was initially funded, no more money has been actively contributed to the account.

    Her 401(k)
    Read all about 401(k) plans here. I won’t bore you with my amateurish description of one. Her contributes 6% of her salary, of which her employer matches 40%, for a total equivalent to 8.4% of her salary.

    So why have I spent the time to explain all of this? Well, Nancy had a great question:

    “Why are you putting money into our retirement accounts while you have…debt?”

    That’s a great question that I answered to in the post: Free money.

    That got me thinking though – is this the most prudent financial decision? I’ve already reduced my retirement contributions to free up some cash for debt repayment.

    Should people with as much debt as us contribute anything to their retirement accounts?

    I Un-Heart Merrill Lynch Direct

    by  • March 29, 2006 • Tagged: , ,  • Comments

    A few years ago, I opened a Roth IRA with Merrill Lynch. While this was a bad idea at the time (I used borrowed money to finance the account), over the years the account hasn’t continued to financially hurt me. Until now.

    I did pretty well with my taxes this year – pretty much came out even with Uncle Sam. But I expect to owe some money next year, and have recently been considering opening an IRA to help reduce my future tax burden. So I was wandering around Merrill Lynch’s website looking for information on an IRA when I came across their fee schedule for IRA’s and Roth IRA’s. Having never paid an annual fee, I was shocked to see a $50 annual fee for balances under $20,000. So I called to find out what that meant. The man told me that yes, they have started charging an annual fee of $50, and that it has already been charged to my account. I asked him why I was never notified about the fee. He said they sent out e-mails a long time ago and it was also posted on their website. I never got that e-mail, and told him so. I also argued that it took me 7 clicks to view the fee schedule and didn’t feel it was fair to bury the notice under 7 clicks and then claim it was “posted” on their website. He checked my account and found that the notice had been sent to an inactive e-mail address (which I specifically recall updating last year). Simple enough, I thought: they will see my point of view and refund the fee. I asked him to void the fee. He checked with his supervisor, who said no. I told him I was very upset with their service and would be closing the account if he did not refund the fee. He put me on hold and went to ask his supervisor again. While I was on hold, I was browsing the fee schedule and I saw another $50 fee, called an “Account Termination Fee”. The guy finally came back on the line and said his supervisor would not approve the refund. I asked him about the account termination fee and he said that when I closed the account they would indeed charge me another $50.

    To restate: They take $50 out of my account without notifying me, provide crappy customer service, and then help themselves to another $50 when they drive me away. Is this a freaking JOKE?

    I said as much to the rep and he agreed that this was unfair. He put me on hold again and a while later told me they will have to charge me the termination fee, but that he will refund it later. He gave me his name, city, and extension. I started filling out the paperwork to move the account to Vanguard as soon as I hung up. I have wanted to move my account to Vanguard for a while anyway (I was already unhappy with ML’s customer service and commissions before their final assault). I am going to deposit some extra cash into my ML account before the transfer goes through so they won’t liquidate my holdings (at the cost of another $180 charge) to cover my fees.

    I think I’ll try calling again and argue the same fight with a different rep. Maybe I can get them to refund both fees. In any case, I am pretty confident that it is going to take a LOT more work before I see any refunds!