Best traditional IRA

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JHZR2

JHZR2

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Hi,

OK, I know the topic allows for a very broad question. This will be the only year that I will be able to reap a tax advantage from contributing to a traditional IRA. I only worked a partial year, so my salary will be low enough to make it advantageous. After this year, the combination of my TSP retirement plan, as well as my salary will not allow me to take any deduction for it.

So, Id like to start a traditional IRA. I might add to it in the future, though I prefer roth type IRAs. Can anyone comment on the best tradtitional IRA to start? I have lots of stock, which I trade myself, its enough as it is. Id rather not have another trading stock account. I wouldnt mind an aggressive stock fund though.

Im looking for something with no fees, something that allows me a one time investment without penalty (some of them have no minimums, but then require you put in at least $25/mo to keep from being charged fees), no up front or back end costs, low administrative fees, etc. I wouldnt mind a stock or commodity or precious metals fund.

If I have money in a non-IRA fund, could I simply roll it into an IRA, and then claim a tax deduction for it? If I do this with $1-2k, its not a big deal from the account side, as I dont need the money currently anyway, but I could do the tax deduction.

before I write anything else to make myself sound too ignorant, uninformed, etc., Ill leave it here. Thanks in advance for any assistance that you might be able to give.

JMH
 
My advice is that you need to balance the risks across your investments. If you know you want a mutual fund, then try Morningstar. They have a good rating system. Also Business Week just ran an article on mutual funds (stock funds 1/24/05, and bond funds 1/31/05) and they rate them overall and against peers. You can find funds that get A's in both ratings, but may not meet your expense concerns.

Yes you can take money from your savings account, brokerage account, or whatever and just move it into an IRA and get the deduction. We do that for my wife who doesn't work, but I keep adding to her IRA, primarily for the deduction. All we are doing is taking current funds and moving them to retirement funds, and are getting the deduction.

I'm not an accountant, so someone may need to correct me, but so far the IRS has had no problem with what we have done.
 
Vangard index fund (S&P500 for example) traded through a 3rd party (Ameritrade, et al) that waive fees for IRAs.

booooring yet safe and you won't get nickled and dimed with fees on your modest investment. Have fun with your "fun" stock funds you already have open.
 
I was under the assumption that for a traditional IRA contribution to be deductible, YOU have to EARN that money in the year that you make the contribution. I tried putting a bunch of money from a workmans comp settlement into an IRA through a financial advisor and they wouldn't let me because it was not earned income. I didn't have any earned income that year cause I was going to school full time and din't have a job.
dunno.gif


[ February 22, 2005, 05:52 PM: Message edited by: Drew99GT ]
 
quote:
Originally posted by JHZR2:
Hi,

OK, I know the topic allows for a very broad question. This will be the only year that I will be able to reap a tax advantage from contributing to a traditional IRA. I only worked a partial year, so my salary will be low enough to make it advantageous. After this year, the combination of my TSP retirement plan, as well as my salary will not allow me to take any deduction for it.

So, Id like to start a traditional IRA. I might add to it in the future, though I prefer roth type IRAs. Can anyone comment on the best tradtitional IRA to start?
JMH
Click to expand...
I'm not really understanding why you would want to do a traditional IRA, if you qualify for a Roth. Why not pay the taxes now and then be able to take the money out tax free.

Anyhow, I don't understand how you won't qualify for one next year? Do you make that much money?
 
Ive maxed out my roth contribution, and this year I was a student for the first few months of the year, so my reduced income will allow me to put the money in this year and take a deduction.

Since I have a retirement plan (government TSP), there is an income limit, above which I cannot take a deduction for contributing to a traditional IRA. Sicne I worked a partial year, I dont meet the income requirements. In the upcoming years, I will make too much money to be able to take advantage of the deduction.

Just figured Id take advantage of it while I can...

Thanks,

JMH
 
I believe you must have at least as much earned income as what you want to contribute, but in the case of a spouse they do not need to work, as long as the contributing spouse has earned income.

You can contribute up to April (15th, I think) for the previous year. We just contributed in January '05, for '04 and got the deduction. You have to specify, or the receiving entity may tag it as a current year contribution. Ours called to make sure we wanted it in '04.
 
quote:
Originally posted by JHZR2:
Ive maxed out my roth contribution, and this year I was a student for the first few months of the year, so my reduced income will allow me to put the money in this year and take a deduction.

Just figured Id take advantage of it while I can...

Thanks,

JMH
Click to expand...
An IRA is and IRA you can only put in a certain amount doens't matter if you have 50 25 roths and 25 Traditionals, once you get to the max amount you are done.

For 2004 it was $3000.
2005 it's $4000.
 
Are you sure about that??? I was under the impression that you could contribute to a traditional IRA, and get the tax break now, andsince a roth is a completely different entity (pay tax today and none tomorrow), it wasnt factored in.

If the limit is for contributions to the Roth AND traditional IRAs for the year, than I guess Im screwed.

Thanks,

JMH
 
thanks, yeah I just looked it up too:

"Total Contributions:
Total annual IRA contributions cannot exceed $3,000 (or $3,500) per individual, whether these are to a Roth IRA, a traditional IRA, or a combination of the two."

http://www.umb.com/personal/ira/roth.html

Im fine with the roth end of things. However, per page 25, IRS publication 17 (for this year's 1404 form), If I'm covered by a retirement plan at work, and my modified AGI is $45k or less (for a single person), then I can take a full deduction for a traditional IRA. Once I pass $55k, I am inelligible for even a partial deduction for funding a traditional IRA. This will be the only year where I would be elligible for a deduction for funding into a traditional IRA. Because of this, I thought it might be worth it... But from the info you gave me, I cant do it anyway.

I was only concerned with a traditional IRA... I think Ill be able to contribute in full to a roth for a long time forward, as Im not going to be making $95k or be gettinbg married any time too soon.

Thanks very much for your help, it clarified everything,

JMH
 
Does anyone have any advice for a good Roth IRA (like through an national investment company?)? Something that is as risk averse as possible? Or should I just go through a local investment advisor? Since I don't make crap for income, I didn't even have any taxable income this year, so I'll reap the benefits of a Roth without paying any taxes.
 
Drew Understand an ira, roth ira are accounts. What you hold/buy in them can be as agressive as abc stock or as conservative as a cd. Find a no yearly fee Ira and then decide what you want to invest inside of it.
 
quote:
Originally posted by salesrep:
Drew Understand an ira, roth ira are accounts. What you hold/buy in them can be as agressive as abc stock or as conservative as a cd. Find a no yearly fee Ira and then decide what you want to invest inside of it.
Click to expand...
I realize that but I've seen ads by some of the large investment houses that offer essentially mutual funds specifically for IRAs that are "contribute and foget it". Just wondering which of these type of funds would be the most diversified and risk averse (specifically for LONG-term holding).
 
Marketing. What they are saying is that they have pre selected funds (which can be bought in or out of an ira) that they feel would be best suited for an ira.
There are many funds out there.
Choose a good value oriented lag. cap fund mix a little intl and a little small cap growth. perhaps 25% bond fund ( if you are squeemish about being 100% in stocks) and let her go the distance.
Or go to an investment advisor if you are unsure you'll probably sleep better.
 
Id suggest a company that has extremely low fees, preferably a company that has funds that index stocks and bond funds.

One day while sitting in border's books, i picked up a book about investing for the lazy man. One suggestion was to use vanguard (who has very low expense ratios, etc) and do 50% in the S&P index fund, 50% in a bond fund. Historically this performed pretty well, throughout any good or bad years, etc.

I think my grandfather has used vanguard for a LONG time fir his IRA and retirement savings, because they have such low fees.

I think the cost of startup is very high though.

JMH
 
quote:
Originally posted by Drew99GT:
Since I don't make crap for income, I didn't even have any taxable income this year
Click to expand...
you didn't have taxable income, was it reported?

In order to have an IRA for a given year you have to have "earned income". For instance my daughter is 12 and I pay her to work my business for me, while she will not "pay taxes" on this, it's still earned income and will be able to have an IRA for this year.

Secondly as far as an account. You idea of conservative or "less risky" is not good. If you are young? You have time on your side. You should take a look at more risky investments over the long term to maximize your growth potential.

I would recommend 25% large Cap, 25% small cap, $25% overseas ( and the final 25% in your choice either up the others or pick something else (like healthcare) )
 
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