Roth IRA with lowest minimum?

[skinnybudget]

DH and I have no retirement started yet and decided that a Roth IRA would be a good way to start. I am thinking about the T.Rowe acct with the Target 2040 as a way to start out, but until later this year $50/month will not be easy. Are there any other options that are more like $25/month? Also, I noticed on the application form that I could apply deposits for 2006 until April - what is the significance of that? Is it just that we could then invest more than the minimum for 2007? What if we don't think we can make the minimum for 2007 anyways? Does it still matter then? We will be putting it towards 2006 but I was just curious.

Thanks!

[Ima saver]

You have until April 17th (income tax day) to open a roth ira for the year 2006. That permits someone to put in the max ($4000) for 2006, and after April 17th, to put in the max for 2007.
I don't know of any mutual funds that will let you put in only $25 a month. Perhaps you should open a roth ira at a bank until you can afford the $50 a month at T. Rowe?? Then you can transfer the bank amount over to the mutual fund.

[creditcardfree]

Originally Posted by Ima saver

You have until April 17th (income tax day) to open a roth ira for the year 2006. That permits someone to put in the max ($4000) for 2006, and after April 17th, to put in the max for 2007.
I don't know of any mutual funds that will let you put in only $25 a month. Perhaps you should open a roth ira at a bank until you can afford the $50 a month at T. Rowe?? Then you can transfer the bank amount over to the mutual fund.

Ima, I agree with your idea. Get the roth ira started at the bank in a money market account and then transfer the money once the minimum is met or they can afford the $50 monthly.

[LuxLiving]

INGdirect.com has one that you can start w/very little.

[usnavy_233]

OAKBX has no minimum deposit amount and no minimum recurring investment amount.

[creditcardfree]

Originally Posted by LuxLiving

INGdirect.com has one that you can start w/very little.

To be exact, their mimimum is $25 if you invest that amount monthly or a flat $250.00 to start. A very good deal.

One can always move the money later, if they prefer a differnet investment vehicle.

[PRICEPLUS]

Start with the bank and flip to t.Rowe when you can. Sounds like a workable scenario.

[disneysteve]

Originally Posted by Ima saver

You have until April 17th (income tax day) to open a roth ira for the year 2006. That permits someone to put in the max ($4000) for 2006, and after April 17th, to put in the max for 2007.

I just wanted to clarify this. You do not need to wait until after April 17 to put in your 2007 contribution. You could, if you had the funds, deposit $8,000 on January 2 - $4,000 for the previous year and $4,000 for the current year.

[kv968]

Starting with a bank at a lower minimum and flipping it when you can you afford the minimum at T Rowe sounds like a good way to go. However make sure to check to see if there's a rollover fee the bank will charge to do that and if so how much it is. If it's more or close to what you're going to have in the account when you flip it, it might be better to just wait until later in the year when you have enough for the $50/month minimum at T Rowe.

I'm all for saving as early as possible, and you have the right idea in doing so, but if you're going to have $125 in an account and it costs $75 to transfer it I think you'd be better off waiting and saving that money.

[Ima saver]

Yes, Steve is right, you can put in $8000 now, $4000 for each year. I have moved my IRA around and never had to pay any kind of fee to move it.

[skinnybudget]

Good news! While DH and I were finally filing all kinds of paperwork away we found out that he had a retirement account from a previous employer! Shows how much we knew about this kind of stuff before! Anyways, it was a statement from Jan 1, 2006 and it showed how much he contributed, but interest doesn't accumulate the year the deposits are made so on the statement there wasn't any interest. He can take his contributions out and I assume that interest was added for 2006 so I'm expecting it will be about $1200. Should we roll this into a Roth IRA? We are at a 0% tax rate now.

[kv968]

Originally Posted by skinnybudget

Good news! While DH and I were finally filing all kinds of paperwork away we found out that he had a retirement account from a previous employer! Shows how much we knew about this kind of stuff before! Anyways, it was a statement from Jan 1, 2006 and it showed how much he contributed, but interest doesn't accumulate the year the deposits are made so on the statement there wasn't any interest. He can take his contributions out and I assume that interest was added for 2006 so I'm expecting it will be about $1200. Should we roll this into a Roth IRA? We are at a 0% tax rate now.

That's great. See what looking around can do sometimes? I would roll that over into an IRA. However since it was in an employer retirement account you won't be able to roll it over into a Roth. You'd have to first roll it over into a Traditional IRA and then convert it to a Roth. You would also have to pay taxes when converting from a Traditional to a Roth. However since you're in a 0% tax bracket you may not have to. Also, in order to be eligible to contribute to a Roth IRA you (or your spouse) must have earned at least as much as the contribution for that year.

If you're still planning on going with T Rowe Price here's some information on how to go about it with them http://www.troweprice.com/common/ind...7 592,00.html
Just scroll down and on the right is a link to rolling over your 401k.

[LuxLiving]

skinnybudget, is there some reason you can't leave it where it is?

What company is it invested with? Do they have decent investment options?

[skinnybudget]

Thanks for the link, I guess DH will have to fill out an application with the employer first before he can start a rollover.

He could leave it, but it earns 6.5% and since he doesn't work there anymore there's no employer contribution and the employer contribution he had from working is not vested unless he is eligible for retirement benefits and withdraws retirement. The employer contribution we'd be giving up is about $1100ish. Do you think it would still be better to leave it? Another option we thought of is just cashing it out, using it as an emergency fund. Then starting a Roth IRA with the $50/month plan.

[kv968]

Originally Posted by skinnybudget

Thanks for the link, I guess DH will have to fill out an application with the employer first before he can start a rollover.

He could leave it, but it earns 6.5% and since he doesn't work there anymore there's no employer contribution and the employer contribution he had from working is not vested unless he is eligible for retirement benefits and withdraws retirement. The employer contribution we'd be giving up is about $1100ish. Do you think it would still be better to leave it? Another option we thought of is just cashing it out, using it as an emergency fund. Then starting a Roth IRA with the $50/month plan.

You're welcome for the link. I'd get in touch with T Rowe first. They may be able to do all the paperwork for you.

As far as what to do with the money that's in there, how much is in there besides the employer contribution may I ask? Also, what is it invested in that it's making 6.5%?

I don't know about cashing it out though. If you do, you'll most likely pay a 10% early withdrawl penalty and taxes on it. If worse comes to worst, you could always consider it an EF right where it is. You won't be able to get at it as quick as if you'd already cashed it in but the option to do so is always there and in the meantime you don't pay taxes or penalties.

[skinnybudget]

The amount that can be taken out is about $1200 + interest from one year. Maybe $1270 or so? I guess it could just be left in there, but I was thinking that since we're at a low tax bracket now we might not get taxed at all moving it to a Roth IRA. I expect our taxes to increase since DH will likely have a full-time steady job starting in the fall. He's a grad student now. At that point he'll have a pre-tax retirement account at his new job with employer contributions.

Then if we can move this money before the 2006 deadline into a Roth IRA we can still put in the max amount for 2007 later this year. Am I thinking too hard about this? I realize it's not all that much money but we recently started even thinking about retirement and I feel like we should make up for lost time.

[kv968]

Originally Posted by skinnybudget

The amount that can be taken out is about $1200 + interest from one year. Maybe $1270 or so? I guess it could just be left in there, but I was thinking that since we're at a low tax bracket now we might not get taxed at all moving it to a Roth IRA. I expect our taxes to increase since DH will likely have a full-time steady job starting in the fall. He's a grad student now. At that point he'll have a pre-tax retirement account at his new job with employer contributions.

Then if we can move this money before the 2006 deadline into a Roth IRA we can still put in the max amount for 2007 later this year. Am I thinking too hard about this? I realize it's not all that much money but we recently started even thinking about retirement and I feel like we should make up for lost time.

What you would have to do is rollover the money into a Traditional IRA and then convert that to a Roth. You won't pay any taxes on it that way. If you close the employer account and take the lump sum, the employer will withhold a mandatory 20% Federal Tax.

Your best bet would be to just roll it over into a Traditional IRA to avoid all taxes and possible penalties. However here's a caveat about the Roth. If I'm not mistaken, in order for the Roth conversion to have counted for 2006, that conversion would have had to been done by the end of last year. If that is the case, you can still convert it, you would just have to pay the taxes on it in 2007.

And no, you're not "...thinking too hard about this?". As you can see there's a lot of little sticking points to consider. If you're planning on using T Rowe (or whoever) for your IRA, I'd give them a call and get the ball rolling with the Traditional rollover. I'm sure they can provide better info as far as the Roth goes but get going with the initial rollover so at least the contribution itself counts for 2006 regardless where the money goes. You can always convert later.