Q: I enjoy listening to you when you fill in for Clark Howard here in Atlanta, and I enjoyed seeing you at the WSB money conference last year. I have a question concerning whether a Roth IRA would make sense for me. My retirement plan at my current employer is an ESOP (Employee Stock Ownership Plan) which is 100 percent funded by the company. The employee is not able to contribute to it. I also have a Rollover IRA which came from a 401K that I had with a former employer which is located with a major mutual fund company. I would like to be able to add to this each year, since I am unable to contribute to my ESOP. Would it make sense to convert this Rollover IRA to a Roth so that I can add after tax dollars each year? Also, how do I determine what percentage to convert each year where the tax bite will not kill me? Thank you for taking the time to answer this question for me.

A: I think you should make contributions to your Roth IRA or to a conventional IRA. How sad that your company will only allow you to save for retirement in its stock. Given the economy, that can be dangerous.

A Roth IRA is a great way to save, as is a conventional IRA. If you want to do a Roth, then convert the account slowly, perhaps over four years, so the taxes won’t completely kill you. Or, leave the account the way it is, and open up a new ROTH IRA and start contributing to that.

If you can start your own business on the side, you’ll be eligible for a KEOGH plan, which will allow you to salt away much, much more.

Q: I have a 100 percent 401(k) with Kroger Foods and I’m not sure I should stay at that percentage or put some into mutual funds.

A: Thanks for your note. You should never have more than 10 percent of your assets in any one investment. You should diversify about 90 percent of your 401(k) into different mutual funds, like an S&P 500 or total market index fund.

Jan. 1, 2005