Retirement Accounts Questions

I am 35 years old and I am will be quitting my current job in August and going into business for myself.  I have approximately $40,000 of value in my 401k and want to know if I should leave it in my current plan or roll it over into a IRA.  Either way, I plan on opening up a Roth IRA to continue putting away money for my retirement years.  I believe I understand that I cannot roll over the 401k to the Roth because of pre- and post- tax issues (I really don't understand this too well) but could you help me understand what is my best course of action.
 

A: If your company's 401(k) plan has been doing well for you, you could leave the funds there. But I'd want more control over them, so think about rolling over the money into a self-directed IRA. Open the account and have the money withdrawn electronically, so you don't touch it. If you get the cash, it could be construed as a withdrawal, and 20% taxes will automatically be withheld. (you'd get it back, but it would be a pain.)

Select an investment company like Fidelity or Charles Schwab that offers a large number of no-load funds and cheap index funds.

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Q:  Is it true that distributions from a regular IRA account can be taken without penalties or paying taxes if they're used for higher education expenses for yourself, spouse, or children.

I read this in an article by Pat Curry posted on www.Bankrate.com website. I hope it is true but I think it is not.

A: I don't think so. My understanding is that you can do that on a ROTH IRA, but not a conventional IRA. To read the rules, go to Ed Slott's www.taxplanet.com. I think it's an excellent resource.

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Q: I am retired from a major computer company and am still working their for an outsourcing company.  I am maxed out in my 401K and am not sure if I'm contributing to a 401K if I can buy either a Roth IRA or a regular IRA.

A: If you're contributing to a 401(k), you can't also contribute to a conventional IRA unless you have a low income. You can, however, contribute to a Roth IRA if your income is $95,000 or less if you're single or $160,000 or less if you're married. This year, the amount you can contribute to a Roth IRA rose to $3,000, or $3,500 (per person) if you're over 50. If you're not contributing to the 401(k) because you're not considered a full-time employee, you may be able to open up a Keogh plan. This would enable you to put away a significant chunk of your income.

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Q:  I enjoy listening to your advice on the Clark Howard show and have a quick question that is not Real Estate related but was wondering if you could answer.  I currently max out my 401K ($11,000 for 2002) and would like to know if I can also max out a Roth IRA ($3000).

A: You can, if your income falls below $95,000 as a single person or $150,000 if you're married. The ability to contribute to a Roth diminishes between $150,000 to $160,000 in income if you're married.

Check out www.taxplanet.com for details.

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Q: My husband has retired at 62 and has a 401k plan, we want to roll it over but are unsure what would be the best and safest place to put it. We won't need the money for a few years but need access in case of an emergency.

A: You should roll over the assets in your 401(k) plan to a self-directed IRA. You can open a self-directed IRA at any financial institution, like Fidelity, Charles Schwab, Merrill Lynch, or Vanguard. Have the financial institution do an electronic transfer, so that you don't "touch" the money. Next, you'll have to decide which stocks or mutual funds or bonds are the best for you. I recommend you divide up the money between an S&P 500 index fund, a total market index fund, and some sort of bond fund. Be sure to leave some in cash.

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Q:  I am looking for investing info for setting up my 1st Roth IRA account ( I am 22) I heard you mention Vanguard for low fees, etc. But I don't see info for Roth IRA on your web site.  I have looked under personal finance.

A: I have information on Roth IRAs in my book, 100 Questions You Should Ask About Your Personal Finances. But here's the short version: Open up your Roth with a great company (like Vanguard, Charles Schwab, Fidelity, etc.). Then, invest in an index fund. Like, the S&P 500, or a total market fund. You'll pay very little in the way of fees, and little, if anything, in the way of taxes. So, it's economical and efficient. Then, keep adding to it over time.

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Q: Could you tell me the real scoop on using IRA funds for a downpayment. I'm a first time home buyer. I think the 10% penalty is waved, but I will still owe income tax on this money. What amount of tax will the IRS charge me?  I appreciate your help.

A: The IRS charges you your marginal tax rate, which is the top tax rate you pay. So if you're in the 28% bracket, you pay 28 percent on the cash. But as a first-time buyers, you are eligible to borrow up to $10,000 from your IRA for the purchase of a home, and use the cash for your down payment and closing cost expenses. It would be less expensive to borrow the cash from your IRA than pay 28 percent (or whatever your marginal tax bracket).

Go to the financial institution where your IRA is invested and ask them to give you the withdrawal rules. Or, you can go to the IRS.gov website and look them up yourself.

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Q: My husband and I started refinancing proceedings.  We've signed good faith estimate
papers and paid for the appraisal, but not rates have gone down again.  We have not
closed on the loan yet.  Is it too late to pull out of this process and look for a better
deal?

A: Rates have really dropped in the last few days. If your lender has not yet dropped your rate, you should shop around and see if you can't get a better deal. Then, go to your lender and tell him or her that you will not refinance the loan unless they can do better, in accordance with what's out there. But make sure you have your numbers straight before you have that conversation. And be prepared to walk away from your appraisal fee. Next time, try to get the lender to put all of the costs into the closing, so you don't have to pay them upfront.

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Q: In your 11/10/01 AZ Republic article you stated you can't use IRA funds for real estate. This worries my husband and me because we can no longer meet our mortgage payments and was going to use my IRA funds to pay off the mortgage.  I know I'd have to pay fed, state, etc. in taxes.  I didn't know you couldn't  use your IRA money market funds to pay off your mortgage.  We don't know where we'll get the extra money now to get out from under this debt.  It is a mfg. home with a 2-car garage, 1600 sq. ft. and quite nice. We do not own the land and have to pay space rent, which is quite high. We're in our late 60's and would appreciate your comments on this.

A: The article is about using your IRA to buy investment property. As you are over the age of 59 1/2, you may withdraw IRA funds (paying taxes of course) penalty-free to use the money for whatever you want. In your case, you're paying down debt, which is perfectly fine. The story concerned people who want to buy investment real estate within their IRA or other tax-deferred retirement accounts.

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Q: My husband & I are 40. We are both employed and are able to live on either ones single income. We currently have 100K - 80% in mutual funds & 20% in stocks saved for retirement. We also have $122k combined in 401k & IRA mutual fund accounts. If one of us quits our job and we contribute the max to a single 401k & the annual $2k for both IRA accounts (and pay off a mortgage, our only debt) until we're 60, How much are we likely to end up with? Do we need a financial advisor? We are not great at financial decisions.

A: It's a little hard to know because you didn't include your annual salary. But typically, the maximum for a 401(k) is $10,500. If you tack on another $4,000, you're saving close to $15,000 every year.

According to the Money Magazine calculator, at www.money.com, you will have $1.034 million saved in the next twenty years. I put in an 8 percent return, and that you are in the 27.5 percent tax bracket on one income, though this may be a little low. I suggest you visit www.money.com, click on Calculators, and play with the scenario yourself.

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Q: I WANT TO MAKE A HARDSHIP WITHDRAWAL FROM MY 401K AT WORK TO HELP FOR A DOWN-PAYMENT FOR A HOUSE/CONDO. PLEASE ADVISE IF THERE IS A LIMITATION AS TO HOW MUCH I CAN WITHDRAW, AND IF THERE IS A PENALTY FOR WITHDRAWING THE MONEY? ALSO DO I HAVE TO PAY A TAX FOR THE WITHDRAWAL?

A: You have to check with your 401(k) plan administrator to find out if (1) your plan permits you to borrow from it for any reason, including the purchase of a home and (2) how much you can withdraw.

If you cannot borrow from the account, you may "cash out." If you are less than 59 1/2, you will owe a 10% penalty on the amount plus whatever regular income taxes are owed in your marginal bracket.

So start with your plan administrator and work from there. By the way, if you're borrowing funds for your down payment, I urge you to consider a 100% or 103% loan, like the ones offered by Countrywide Home Loans (www.countrywide.com). I'd much rather see you pay private mortgage insurance than borrow from your 401(k).

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Q: My daughter is 15 years old. she works for a small company ( 6hrs/week ie about $200/month). Company issues her pay check every month. She started a Roth IRA. Now I come to know company is issuing her 1099 not regular w-2 forms. Is she eligible for a Roth IRA. if not what action she has to take?

A: Your daughter is certainly eligible for a Roth IRA. She may contribute up to the amount earned in a given year. But she must also file a federal income tax return -- even though she may not owe any taxes. Please consult with a tax preparer so that you file correctly.

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Q: I have a 401k from my former employer that I need to make a decision about. Is there any way I can roll over the entire amount into something that I can then apply to my daughter's college tuition without taking a tax penalty?

A: You can probably escape the penalty, but you'll have to pay taxes on the cash. You can roll your 401(k) into a self-directed IRA. If you qualify for a Roth IRA, you can roll over the amount into a ROTH. But you will have to pay taxes at your current tax rate on the money. Once the cash is in the ROTH, you should be able to use it to pay college tuition. Please talk to a CPA to make sure you can qualify for this.

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Q: I want to start by telling you thanks for what you are doing, anyone else seems to want money for the advise I am seeking, before I know my options.  I have about $8,000 in an old 401k from a previous job.  I really want to buy an acre of property with it, but I cannot afford to take a hit with the penalties. How can I roll it over into an IRA that will allow me to purchase property as my IRA.

A: You can't. My experts tell me that you can roll the money over into an IRA but cannot use it to buy individual property. You can buy a REIT with it, but I don't advise that.

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Q:  My company does not have a good 401k- they don't contribute anything to it. Would it be smarter for me to put my money into an IRA or some other long term investment?

A: You should immediately open a Roth IRA, into which you can deposit up to $2,000 in after tax income. You may also be eligible for a conventional IRA since your company does not provide one. Please contact your bank, or a financial institution such as Charles Schwab, Fidelity or Vanguard for information on how to open up these accounts.

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Q: I currently have about $900.00 in a 401K program with a company I no longer wok for.  My present employment does not offer 401K programs.  I am 27 years old and married (my husband does not participate in his 401K).  Should I roll my present earnings into a traditional IRA or a Roth IRA?  Both are available to me by the same company presently handling my 401K account (Vanguard).

A: If you roll the cash into a Roth IRA, you will pay taxes on it because you will turn a pre=tax retirement account into an after-tax account. Because you are less than 59 1/2 years old, you will also pay a penalty on the cash.

Roll the money into a traditional IRA. Leave it at Vanguard in their S&P 500 Index fund. Since you don't have retirement options at your new company, make sure you contribute $2,000 to your IRA this year and also open up a Roth IRA and deposit $2,000 in after tax money in to this account (You can invest in another S&P  500 index fund or choose another index at Vanguard).

That will give you a $4,000 head start on your retirement, which is pretty significant -- especially at your age.

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Q: I heard you on Clark Howard talk about how many retired people will no longer stay in one geographic location.  I am 46 and considering a major career change to the field of geriatrics/aging.  Can you give me some idea how this trend may affect future employment in independent retirement homes?

A: There are a few states that are becoming magnets for retirees, including Florida, Nevada, Arizona, New Mexico, and Washington State.

It seems to me that while a lot of seniors are shifting around from state to state, many will still end up in these states.

Even so, there will be loads of retirees in every major metro area, so you'll be able to pick where you want to be for the most part and probably find suitable employment.

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Q: On this mornings news (7/31/01) I heard something about 401K in the workplace and that if the employer only contributes up to 3%, that this is not a very good contribution on the employers part. I didn't get to hear the whole thing and would like to know more about it.

A: Someone wrote in saying that their employer's 401(k) only option for investment is in a 6% front load fund. The employer matches 3%, but since the fund is so expensive, the viewer only contributes 3% and then does a Roth IRA. She asked if this was a good strategy, given the expense of the fund.

I expressed my outrage that an employer would even off a fund with a 6% load and suggested she spend her time gathering all of the other employees together to demand better choices. I said that the 3 percent match was nice, but in this case, would only effectively lower the fund load to 3 percent, which was still outrageous.

I have 401k plan at my work place which invests only in front loaded mutual funds. Load is about 6  percent. My employer matches  up to first 3 percent of my contribution and I am am currently vested 60% of employer's money.

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Q:  Currently I contribute only 3 percent to my 401k because of the load and  just to take advantage of maximum employer match.

I also have Roth IRA which I have contributed maximum to. Here are my questions: Is this strategy ok? Does it make any sense to increase my contribution? If so how much? Or I will be better off quitting 401k and contributing to regular IRA next year?  

A: Shame on your employer for investing in a 6 percent front load fund. You should invest your time in gather up employee support to change the mutual fund offerings. Do some research at www.morningstar.com and identify other places to invest your cash. Then, petition your employer to make this change.

As for your investments, I can understand why you'd be hesitant to invest more in your employer's plan. Try to do whatever investing you can outside your official retirement accounts, and sock away whatever you can. If you can persuade your employer to change investment firms, then you can resume adding as much as you can to your 401(k).

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Q: Our 21 year old college student son will make over $2,000 from his summer job and would like to put it in an IRA.  Can you advise us on some good funds for a person his age to consider?

A: Congratulations to your son on his financial wherewithal.

I would open up the ROTH IRA at Vanguard and put the cash into their S&P 500 fund. Another alternative is for your son to investigate some of the Fortune 500 companies and buy a few individual shares in one company. Following the fortunes of his company and learning to read the annual reports might interest him in money and create a vocation that will suit him and help him prosper for his entire life.

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Q: What is the minimum investment to purchase a Roth IRA?

A: That depends on the financial institution where you open up the ROTH IRA account. For some places, it's $250 to $1,000. Others may let you do a smaller amount, if you agree to automatic monthly withdrawals to invest more cash.

Remember, the ROTH IRA isn't by itself an investment. It's a type of retirement account. Once the money is there, you have to invest it in something, stocks, bonds or keep it in cash.

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Q: How do I physically go about purchasing a Roth IRA? I understand they are a good investment but don't know how to go about actually getting one.

A:  Any financial institution will offer a Roth IRA option. It's a type of account. So, visit a Fidelity Investments, Charles Schwab, etc. and fill out the forms. But be aware, once your funds are there, you have to choose the investment for them. So, if you deposit $2,000, you need to find a mutual fund or purchase an individual stock with those funds, or they'll just grow at the minimum account interest rate of around 2-3 percent.

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Q: Our company just started the 401k loan program. It is all new to me but the interest rate is low. We have about 15,000 in credit card debt. What are the pros and cons of these loans? We just want to get out of credit card use altogether.

A: You can't borrow from a 401(k) program until you have 401(k) savings. In essence, you're borrowing from yourself.

If you can't manage your debt, you will need to take some dramatic steps, including transferring the balances to a low-interest rate card and pumping the monthly "savings" into prepaying the debt; paying your monthly minimum twice a month; getting a second part-time job and devoting all of your earnings toward paying down the debt; and, refinancing your home loan (or getting a home equity loan) to trade non-deductible debt for deductible debt at a lower interest rate.

I suggest you seek the advice of a non-profit credit counseling agency like CCCS. You can contact the National Foundation for Consumer Credit (www.nfcc.org) for more help and a referral to a CCCS office near you.

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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 % 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.

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Q: I just recently retired from a job I had worked for twenty four years to start working for a new company that I will be eventually working for myself. I have decided to differ acceptance of my retirement benefit, and my 401k, and let them continue to grow with the company I previously worked for. I have had some difficulty finding a financial advice about retirement, and tax savings plans with the income that I will be earning at my new job. I would further like advice on education savings plans for our three month old daughter. I have made some calls to some local financial advice firms, and have only found one person interested in talking with me on a fee only basis for $200 pre hr. and he said the he dose not usually see clients on a fee only term.

A: You can call 888-FEE ONLY which is the number of the national association of personal financial advisors, which has only fee-only advisors as members. They can direct you further.

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Q: Probably you've been asked this question time and time again since the market took a dive last year but I obviously missed the answer.

If I contribute 7% of my salary to my 401K weekly in this bearish market am I better off a.) changing my contribution to 2% until the market picks up or since it appears that I've been consistent in losing my bundle over the last 1 1/2 years or b.) leaving it at 7% allowing me to buy into more at a lower cost or c.) increasing it to 8 or 10% while the market's low and changing it back to 7% when the market picks up again?

What is your opinion?

A: No one can time the market. Not the professionals, and not anyone you know who hangs out at the water cooler. (If they could, they wouldn't be there). So I'm in favor of continuing your regular investment strategy in good times and bad. In fact, you might increase your contribution during the bad times because you'll just buy more at a lower overall price.

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Q: We are just average people with an average income.  We make an IRA contribution each year and have in the past put the contributions in either a fidelity Magellan fund or a Janus fund.  With all of the turmoil in the stock market--would these type of funds be a wise choice or could you recommend something else?  I am 37 and my husband is 38.  Thanks in advance for the reply--we need to make a decision by the 15th for this years contribution.

A: I think the fact that you're investing on a regular basis is excellent. You have a window of at least 30 years until you retire, and over time, these funds should provide an excellent return. Magellan invests in about 300 companies, typically big blue chips and some tech stocks. Janus is much more aggressive, and indeed, some of their funds are down 50 percent or more this year.

The point is, both are good funds, and your steady investment over time will serve you well. If you are looking to diversify, I'd invest in an S&P 500 index fund.

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Q: My husband and I have recently become very interested in Mutual and Index Funds. After much investigating, it appears Index Funds, not Mutual Funds, are the best way for us to go. I recently resigned from my company and have about $15,000 in my 401K that I'd like to test the investing waters with by putting part of into an Index Fund without going through a broker. The rest I will put into a money market until I feel comfortable enough to eventually invest it all. Can you walk me through, from the beginning, how we go about investing in an Index Fund which do you currently like?

A: Vanguard is the granddaddy of index funds (www.vanguard.com). They're the cheapest and I think best. The S&P 500 index fund that's tax managed will likely give you excellent returns over the long haul.

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Q: The company that I have been working for has been acquired by another one. I was contributing to a 401k plan which has been canceled. I also own a two bed/bath room house which I think its value is $100,000.00 The house mortgage balance is $75,000.00  I like to buy a bigger house of no more than $140,000.00 The new company does not have a 401k plan. My 401k balance is $48,000.00 less a $4,043.00 loan. I have the option to transfer the balance less 20% tax deduction to an IRA or to have a lump sum payable to me, which would be  less 30% in tax deduction and the loan balance (I would receive about $30,000.00)  My question is what is best for me: 1. transfer the 401k balance to an IRA or 2. Use the 401k plan money (about $30,000.00 ) and the house equity (about $25,000.00) for a downpayment (in order to have about the same monthly mortgage payment) for a bigger house taking advantage of low interest rates. currently my mortgage rate is 7.5%

A: I think you should sell your home, pay off your 401(k) loan, and then use the rest to buy a new home. If you can't afford a larger mortgage without using your 401(k) cash, then you should stay where you are. Also, I'd rollover your 401(k) to an IRA, but don't touch the cash. Then, you won't have to pay any withholding.

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Q: I am considering a job offer that has a greater long-term potential for advancement.  I have a 401K loan (residential) with my current employer that has a payoff around $8000.  I understand the tax implications of not paying it off, but paying this loan in full within 30 days is near impossible.  Any suggestions?  I have read about using a "introductory rate" credit card for a short term and setting up a new 401K loan with my new employer after rolling over my 401K balance to their plan.  This is the only realistic plan I can see right now.

I would hate to turn down a long-term opportunity due to a short-term dilemma like an $8000 debt.  I am 32 years old and have no other debt than a mortgage and one car note.  My 401K account and Roth IRA Total around $70,000 so I think I am in good shape otherwise. Any thoughts on this matter?

A: If you don't pay back the loan, it will be considered a distribution and you will owe income taxes as well as a penalty. You may end up paying close to $4,000 for this debt.

I don't know when you bought your home, but you  may have some equity that you can tap. Consider getting a home equity loan to pay back the $8,000 (or as much of it as you can manage).

If you want to transfer your 401(k) to the new company, that may be fine. But it will not change the status of your loan.

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Q: I have universal life policy for $50,000 that I have had for 15 years and the cash value is $6,000 if I should cash it out.

Should I get term and cash out this policy?

A: Cash value policies are worthless unless you're going to keep them for the long run. But now you can see the problem: 15 years into paying on it, and you only have $6,000 in the cash value part of the plan, and will $50,000 really be enough life insurance? Probably not. You may be better off stopping this now, taking your $6,000 and buying enough term life insurance to really cover your loved ones in case of an emergency.  A healthy, non smoking 35-year old man can buy $500,000 worth of insurance for about $500 per year. You could invest the rest ($5,500) and probably have enough money to pay this bill for the next 15 to 20 years).

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Q: You made a comment about a Roth IRA that I have heard twice now but can not find in writing.  If you have a Roth IRA over 5 years can you withdraw that money and use it for a college education?  I have 2 children, 7 and 3, and if I were to open a Roth IRA in my name today to save for their education it would certainly be used more than 5 years from now.  So 2 questions?  1) Can you use Roth IRA savings for college?  2) How does this plan for savings for kids college compare and contrast to the 529b plans that Clark so frequently endorses?

A: You can use a Roth IRA to save for your children's college education and it valuable in a number of ways. First, the money grows tax-free. Second, you may withdraw your contributions at any time, but you may also withdraw your earnings after five years to pay for medical or tuition expenses. Because a Roth is a retirement vehicle, it does not count when factoring in college aid monies.

I think the 529 plans are good, too. Remember, with a Roth, you're limited to $2,000 per year which may or may not be enough. If you can, do both.

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Q: I have a 100% 401k 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.

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Q: I have a 401(k) account and I am trying to determine the best mix of the funds available to me.  In addition to my annual salary, I receive a retirement check from DOD for my 20 years of Army service.  I have tried to include my wife's 403(b) account in the formula, but since she has only Fidelity funds available and I have several different ones from Vanguard, Janus, Fidelity, and Invesco this doesn't work.  The reason is because the mix is heavily weighted towards Fidelity and I can't the place the recommended per cent in each fund.  Also, we have different salaries and contribute at different levels.

I have used the 401(k) planning programs from Morningstar and the one on the U.S. News & World Report.  Neither can "handle" the Army retired pay.  I finally got US News to admit that their program was not designed to allow for someone to receive retired military pay.

In the Morningstar program, the only way I could get it to work was to count it as a pension from another company with a payment starting a year in the future.

Do you have another one that I can try?

A: Instead of worrying about the army money as pension cash, why don't you include it as "other income". That's usually an option on these kinds of programs.

You might try www.Quicken.com. I think a lot of their site.

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Q: I know that you can write off loses of stocks that you have invested in, but can you do the same thing if those stocks are in a IRA? My wife and I have been hammered this year, so I'm trying too find info on this and thought I would give you a try.

A: You generally may not write off the loss in an IRA. But check with a tax advisor to make sure your situation isn't a little different.

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Q: Which investment plan would you recommend for saving for college?   Are there better plans than 529 plans or Roth IRAs?

My kids are 12 & 14, in 7th & 8th grade.

A: Any plan that gets you to save money is worthwhile. A 529 plan is good, but you don't have a lot of time to save because your kids are already 4 and 6 years away from college. The Roth IRA is good because it keeps the money in your control. I'd look into prepaid tuition plans, especially if the 14-year old has an idea of where he/she wants to go.

Finally, your kids can borrow for college. No one will lend you a dime for your retirement. So if you aren't already maxing out your retirement plans, that should be your priority.

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Q: My husband and I want to start saving with a Roth IRA this year (I'm 44, he's 49).  One question I have not been able to find an answer to is - how is this money invested?  Is it a savings account earning money at a set percentage rate (like a CD)?  Is it money that is invested in mutual funds? If so, do you choose the funds?  Are there options?

After finding the answer to the question above, my next question would be - what are the advantages/disadvantages to investing the Roth in a local "bank" or an institution such as "Vanguard"?

A: A Roth IRA, Conventional IRA, KEOGH, or 401(k) are just the vehicles. You choose the investment within the vehicles. Think of them as being the banana peel. Except you get to choose the banana (investment).

So you can keep the money in a CD, bond, mutual fund, or individual shares of stock. You decide.

Any of the major fund companies offer Roth IRAs as does your bank. The upside to using a financial company is that you have a much larger scope of investments from which to choose.

For you, I'd recommend Vanguard, because you can put all of your funds into an S&P 500 index fund, which is plain vanilla, but will do the trick without requiring too much work from you.

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Q: At the beginning of 2000 I put $2000.00 into a self managed ROTH IRA. It was in Nextel stock. Now the stock has fallen to $800.00.

My question is can I put $1200.00 back into the IRA and bring it back up to $2000.00 before year end?

A: Sorry, nope. The government doesn't allow you to "make up" for poor investments, just as it doesn't allow you to take away anything if the stock doubled in value.

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Q: I have a small business in Chamblee Ga.  My 5 Guys are great and I expect to keep them for a long time.  I want to do a simple IRA so everyone can have a retirement plan. I have read most of the rules and understand how they work.

Is it possible or just to much trouble to handle this ALL myself? I just opened a Tiaa-Creff (growth and income) Roth for myself and I like it a lot. Vanguard index 500 I was in till three weeks ago went down TIGIX went up.  I have not found a MSDW online or a Stanley DW.  That  handle this fund. I was looking at a Government site and it seemed so simple and no reporting or filing requirements. Could I do this Myself? One of the best things is the low starting cost and fees. What other options should I look at or mutual funds should I consider or offer?  Thank you for a response.

Q: You can do a SIMPLE IRA yourself. Check with a financial institution like Fidelity Investments or Charles Schwab. I know they offer SIMPLE IRAs because I checked into them myself. Also, they offer loads of investment opportunities for your employees.