Roth IRA???

[Guest sleepy]

addict-

I'm no financial guru, but I don't see how that's possible since TSP payroll deducted. If that's the case, I'd love to be able to take some of my '07 earnings and throw them in my TSP or 401k from '06. That would be real nice.

This website might be of interest www.clarkhoward.com He is a nerdy guy and the website is a little tough to navigate--for me, at least--but there is good stuff there. He is a big fan of the military, too.

Originally posted by BENDY:

Where's rumblefish_1? Was he the 16 driver or is that you...this place is confusing sometimes...At least Hydro is Hydro, Rainman is Rainman, Sleepy is Sleepy and so forth.

"The room is spinning"...from all the name changing.

Baffles me, too. There are many ripoffs. I'm surprised the other six dwarfs haven't shown up here. Of course, I could double for Grumpy and Dopey the way I've been lately. Eh. Somebody else is going to have to be Bashful, though.

I think I'll change mine to Grumpy.

[Guest Cap-10]

Thread Revival.

Time for coffee talk.

Currently, 2008 Roth IRA contribution limits are 5K.

Assuming I have at least 10K a year to invest, would I be better off with two Roth IRA's (mine and the wifes) or just my Roth and the TSP?

If I have more than 10K, max out both IRA's and put the extra in TSP?

Discuss!

Cap-10

[Guest Sebastian]

I think Roth IRAs are the best investment that can be made. So doubling up on the Roth sounds good. I would want to make sure to diversify where the money is going (i.e. don't put all 10k in the same mutual fund).

Also, does your wife have her own retirement program at work? They may do vesting so you might want to funnel the money that way.

According to Suzie Orman, the order to invest goes like this 1. 401k if vesting, 2. Roth IRA, 3. Traditional IRA or 401k with no vesting (to include military TSP).

[Zippy]

Just to add to the Target based fund list, USAA just began offering their own Target based mutual funds.

[USAF Pilot]

I’ve been maxing out my Roth IRA for several years now and am finally in a position to begin to max out an account for my wife. My understanding of the Roth IRA is that there is no joint (husband and wife) account option. I’d like my wife to open an account under her name so we can max that out too. However, my wife is a stay at home mom with no income of her own.

Anyone know if I can I fill her Roth with the income I have?

[Guest AndThenSome]

Yes. The gov't doesn't care who provides the money for the IRA, only that the account doesn't go over the maximum amount per year. I'm currently paying into both IRAs because my wife doesn't work. The only potential negative is that once the money is in someone else's account, I'm pretty sure it's theirs. Meaning, in the event of divorce I don't think you can say, "I should get every penny of her IRA because it was all my money that went into it."

[Guest Cap-10]

I’ve been maxing out my Roth IRA for several years now and am finally in a position to begin to max out an account for my wife. My understanding of the Roth IRA is that there is no joint (husband and wife) account option. I’d like my wife to open an account under her name so we can max that out too. However, my wife is a stay at home mom with no income of her own.

Anyone know if I can I fill her Roth with the income I have?

I just learned this the other day (since my last post in this thread).

Yes you can....it's called a Spousal IRA.

From Investopedia.com

Generally, individuals who are unemployed are not allowed to contribute to retirement accounts such as IRAs because they do not have eligible compensation. However, there is an exception for individuals with spouses that are employed and meet certain requirements. The employed spouse is allowed to make an IRA contribution on behalf of a non-working spouse or a spouse who has little income. These contributions are referred to as "spousal IRA contributions". Here we review the eligibility requirements for making spousal IRA contributions.

Eligibility Requirements

To make a spousal IRA contribution, you must meet the following requirements:

You must be married.

You must file a joint income-tax return.

You must have compensation or earned income of at least the amount you contribute to your IRAs.

Age Limit

If you decide to fund a Traditional IRA for your spouse, he or she must be under age 70.5 for the year for which the contribution is being made. For example, if your spouse attained age 70.5 in 2008, you wouldn't have been permitted to make a contribution to his or her Traditional IRA for 2008. You would, however, have been able to make a spousal IRA contribution for tax year 2007, provided the contribution was made by April 17, 2008.

There are no age limits that apply to Roth IRA contributions.

Compensation Limit

While there is no cap on the amount you may earn in order to fund a Traditional IRA, this is not so for a Roth IRA. If your compensation is more than $169,000, you are not allowed to contribute to a Roth IRA for yourself or your spouse. If your compensation is below $159,000, you may contribute up to the limit allowed for the year. Once your compensation reaches $159,000, your contribution limit is reduced and phases out until you reach a compensation of $169,000. When your compensation falls between $159,000 and $169,000, your tax professional will be able to help you determine the maximum amount that you are allowed to contribute to your and/or your spouse's Roth IRA.

Contribution Limit

You may contribute 100% of your compensation or the tax year's IRA contribution limit, whichever is less, to your IRA. Bear in mind that the contribution limit that applies to you also applies to your spouse. For example, for tax year 2008, which has a contribution limit of $5,000, you may contribute no more than $10,000 in total to both IRAs. If you are age 50 or older by the end of the year for which the contribution is being made, the limit is increased by the catch-up amount.

Cap-10

[LJ Driver]

Fellas,

TSP Question:

I am approaching eligibility status for the pilot bonus (probably 25k again). I know that I can put 46k into the TSP if I go to a combat zone during the year.

--Can I put all 25k of the bonus into the TSP?

--If I can indeed put the entire amount into the TSP, do I have to be in the combat zone the month I get the bonus or do I just have to go sometime during the year?

Thanks

[JarheadBoom]

The only potential negative is that once the money is in someone else's account, I'm pretty sure it's theirs. Meaning, in the event of divorce I don't think you can say, "I should get every penny of her IRA because it was all my money that went into it."

Depends on what state you're in. My father-in-law recently had to fight off a legal attempt by his soon-to-be ex-wife to take half of HIS 401k, which she never contributed to. He countered with half of her 401k plus a couple other things (his had more $$)... she decided to let it go... but the demand was legal in PA.

*** EDIT ***

I just re-read what I wrote, and we're talking about two similar-but-different things, but the bottom line remains - check the laws in your state.

[Guest SPO]

- Thread Revival Redux -

I've got about 20k in my TSP. Is it possible to roll this cash from my TSP into a Roth IRA while still on active duty or do I have to wait until I retire or separate?

If I can roll it over while on AD, is there any benefit to doing so in a combat zone? I understand that under normal conditions I would pay income tax on the 20k I'm rolling over. However, does the CZTE benefit apply to an IRA rollover and negate taxes? I'm assuming no and that it would only be excluded from income tax if it was earned in non-income tax conditions but someone correct me if I'm wrong.

- SPO

[Jughead]

I've got about 20k in my TSP. Is it possible to roll this cash from my TSP into a Roth IRA while still on active duty or do I have to wait until I retire or separate?

No--unless you're 59 1/2 or older. Only hardship or age-based withdrawals are available while on active duty (and in this context, the rollover you want is included in the term "withdrawal"). If you have any tax exempt contributions to your TSP, those are not eligible for rollover treatment (whether age-based or after separation). https://www.tsp.gov/forms/tspbk08.pdf

If I can roll it over while on AD, is there any benefit to doing so in a combat zone? I understand that under normal conditions I would pay income tax on the 20k I'm rolling over. However, does the CZTE benefit apply to an IRA rollover and negate taxes? I'm assuming no and that it would only be excluded from income tax if it was earned in non-income tax conditions but someone correct me if I'm wrong.

Moot point, since you can't do it--but, my understanding of how the CZTE works would be as you say, and any such taxes would still be due. You'd still have the advantage of (potentially) being in a lower tax bracket due to CZTE and therefore paying lower taxes on the conversion....

[Jughead]

Here's my Roth question:

OK, so starting in 2010, Traditional IRAs can be converted to Roth IRAs regardless of income, with the taxable amount treated as income in the year converted (but without any tax penalty); those converted in 2010 (only) can have the taxable amount spread out over 2011 & 2012. Got it--good news for anyone who believes in the Roth (me) but has money in a Traditional that for whatever reason couldn't formerly be put in a Roth (also me).

One catch: there's still an income limit for making contributions to the Roth. If I assume I'll hit that limit again (which I will in years without > ~3 months CZTE), I can't make the Roth contribution, so I put it in the Traditional. But, wait... what's to stop me from immediately converting that to a Roth? And, if I can do so, what's the point of having the limit in the first place?

I'm confused.....

[addict]

Here's my Roth question:

OK, so starting in 2010, Traditional IRAs can be converted to Roth IRAs regardless of income, with the taxable amount treated as income in the year converted (but without any tax penalty); those converted in 2010 (only) can have the taxable amount spread out over 2011 & 2012. Got it--good news for anyone who believes in the Roth (me) but has money in a Traditional that for whatever reason couldn't formerly be put in a Roth (also me).

One catch: there's still an income limit for making contributions to the Roth. If I assume I'll hit that limit again (which I will in years without > ~3 months CZTE), I can't make the Roth contribution, so I put it in the Traditional. But, wait... what's to stop me from immediately converting that to a Roth? And, if I can do so, what's the point of having the limit in the first place?

I'm confused.....

the contribution limit applies to both IRA's as a total.

[Guest SPO]

the contribution limit applies to both IRA's as a total.

I don't think so. I asked my stock broker this exact question and he said you can max out your Roth IRA ($5,000 for those under 59.5) and still roll a traditional IRA into a Roth IRA. I'm fuzzy on the details but I think it lies in the new 2010 tax law guidance somewhere.

So, I recommend those of you who want to max out your Roth IRA and roll over a traditional IRA into a Roth IRA to do some reseach or check with a professional before you write it off as impossible.

- SPO

[Jughead]

the contribution limit applies to both IRA's as a total.

True--but that's not my question. I'm asking about being unable to contribute to a Roth (due to income limits still in effect), so instead making that contribution ($5K or less for 2010) to a Traditional IRA, then immediately converting it to a Roth (which has no income limit on doing so starting in 2010).

I found an article on Schwab's website confirming that you CAN indeed do this--for now. The author speculates that Congress will close this "loophole" soon, since it totally defeats the purpose of having income limits for contributions to a Roth in the first place. I tried to get back to the article, but I've been locked out of Schwab's website (don't think it likes my IP location in Iraq); if I get back to it, I'll post the exact quote.

I asked my stock broker this exact question and he said you can max out your Roth IRA ($5,000 for those under 59.5) and still roll a traditional IRA into a Roth IRA. I'm fuzzy on the details but I think it lies in the new 2010 tax law guidance somewhere.

True also, but a separate question. Don't confuse the annual *contribution* limits ($5K for 2010, subject to income limits in the case of a Roth) with the income limit to *convert* a Traditional IRA to a Roth (the elimination of the income limits on *conversion* is the change in the 2010 tax law, and the basis of this discussion).

[B0neWs0]

Just a quick question.....

I am a newly pinned 2Lt in flight school now. I have been saving for a bit, but I want to start making my money work for me in a better way since I don't have the time right now to monitor the stock market and trade myself. I can max out a Roth IRA this year if I want to and still have an emergency fund and enough to contribute some to a TSP. My main question is, what is a good financial institution to go through for a Roth IRA? I want to start this soon so that I can get the tax credit for 2011. Any suggestions?

[MilitaryToFinance]

Vanguard is fantastic. I had my first investments with them when I was still in high school and I currently use them for my Roth IRA. They have a large number of no-load funds(funds that don't charge you a fee just to put your money in) and some great indexing funds to choose from. I would look them up. As a young Lt you've got lots of time ahead of you so don't be afraid to get somewhat aggressive because you have the time to ride out volatility swings. There are some good Mid-cap and Small-Cap funds at Vanguard that I like personally but your risk tolerance may be different than mine.

[BFM this]

I've got quite a bit into T. Rowe Price and am generally happy with thier management and returns. I've also looked at Vanguard and they look good as well.

Here's a question for the masses:

So I've got my portfolio split between an advisor and my own vehicles (like TRP). None of the stuff that I choose has any loads. I invest, let it grow, and every year move funds from regular to IRA accounts. Annually I see custodial fees drawn from my IRAs, and there is the expenses that is contained with the regular account perspectus' (typically btw .8 and 1.2%), but otherwise, not a load in sight.

Contrast that with my advisor:

Seems that with every event, a monthly automatic investment, moving funds, etc.; it's an auto 5 to 6%. Now my advisor tells me "you always have a load, no matter where you invest." Hmm. A little internet research tells me that her company is probably getting most of this load toward them in commissions.

Am I being fleeced?

[MilitaryToFinance]

Well you're being fleeced but it's common practice, not just you. Most actively managed funds charge loads and fees on the order of the percentage you are paying. But you said it yourself just above that you do your own investing in no-load funds and don't pay that 5%. You're taking a big loss up front for no good reason other than the belief your advisor is smarter than you. Also, look at upping your investment amount. I use Vanguard so I can't speak for TRowe Price but I know that once you hit $10,000 they don't charge you an annual maintenance fee anymore.

[matmacwc]

And again.....www.daveramsey.com

[Vetter]

Dave Ramsey is good for getting out of debt. I used him and it worked. But as you get more knowledge, Dave Ramsey seems to lack sophistication when it comes to investing.

While deployed, I found the Bogleheads Wiki page and started reading. Within a month, I was maxing out my TSP and moved all IRA money into a 6-fund ETF portfolio at Vanguard. I think my expense ratio is less than .20% over my entire TSP/Roth portfolio. It's easy, smart, and in the end, keeping money out of advisor's grubby hands means lots more money in your pockets in the end.

Managing money doesn't need to be cosmic. You are intelligent enough to manage your own money...

Edited June 5, 2011 by Vetter

[Smokin]

I enthusiastically second Vanguard. I used to have my investments with a full service broker until I read The Investor's Manifesto by William Bernstein. It is a great book and I highly recommend it to everyone. He explains in great detail about how it is possible for a full service broker can make more money off of your investments than you do. After reading the book, I did my own research and ended up agreeing with Bernstein that Vanguard is the best choice. Like USAA, it is an investor owned company rather than publicly traded, so it does not have to succumb to the short term demands of stockholders looking for a quarterly profit instead of a long term growth. Based on their MUCH lower operating costs and passively managed funds and assuming a historic return, Vanguard would make me around $300,000 more than my full service broker. Plus, it turns out they are actually easier to work with than my previous full service broker, so it is a win-win for me.

[Guest]

I enthusiastically second Vanguard.

3

[B0neWs0]

Thanks for the help! My dad keeps trying to pressure me into going through a family friend, but I don't really know if I trust that. Family friends usually try to take advantage of that friendship and do stupid things with money from what I have seen and read. Just wanting to see what some people are using on AD. I started to look into Vanguard last night via their website and I like what I see. Thanks again for all the help!

[Helo Kitty]

Young loggy here looking to switch over from E. Jones to Vanguard and paying more into my retirement in the coming years. Does anyone recommend investigating any specific funds or have most of you guys been pretty happy with their standard Roth?