Roth question

[fiffer010]

I am currently researching and looknig for a place to have my Roth IRA. I eventually want to invest in real estate through a self-directed roth IRA. Can I open it at say vangaurd or fidelity to take advantage of the low custodial fees and eventually transfer the roth to another custodian that has more expertise in real estate? or should have my first account with someplace that has the expertise in real estate roth IRAs?

Furthermore, for those who have lifecycle funds, or also called target retirement funds, how have you liked it so far?

Thank you for your time, I will enjoy reading your responses.

[gakline]

You can open a Roth IRA anywhere and move it anytime you like (almost). If you make regular contributions, make sure you check on the minimum amount of time before you can removed the funds without getting hit with fees. This is not early withdrawl from the IRA, these fees are fund based. When you go to relocate your funds, have the new fund company transfer for you. If you were to withdrawl from Vanguard and have them write you a check, they will report your income. You will probably have to fill out a form saying you reinvested the money else where. It's just one more step.

[suedavids]

Originally Posted by fiffer010

I am currently researching and looknig for a place to have my Roth IRA. I eventually want to invest in real estate through a self-directed roth IRA. Can I open it at say vangaurd or fidelity to take advantage of the low custodial fees and eventually transfer the roth to another custodian that has more expertise in real estate? or should have my first account with someplace that has the expertise in real estate roth IRAs?

Furthermore, for those who have lifecycle funds, or also called target retirement funds, how have you liked it so far?

Thank you for your time, I will enjoy reading your responses.

I would open it with fidelity. You could invest in REITS within your Roth IRA or you can open a brokerage account within your IRA. Vangaurd is fine too but Fidelity does have some additional managed funds. I actually deal with both companies.
Max out your ROTH before putting more money into other retirement vehicals. ROTH grows tax free the rest of your life. WOW!!!

[fiffer010]

Well this is my only retirement vehicle as of now since i'm only 19.I am planning to max it out every year, although it is quite tough doing that while in college. I am glad to hear that I can transfer my Roth to a diferent custodian when ever I want, I would hate to be locked in for the next 40-60 years. My 3 options I am looking at right now are fidelity, vangaurd, and T.rowe. I am going to start out with a life cycle funf till I have enough money and research done to add real estate to my portfolio. Again, does any ne have any experience with these target retirement funds?

[sweeps]

Yes, I have an IRA (traditional, not Roth) at Vanguard. It was rolled over from a 401(k) at a previous job. It is entirely invested in the Vanguard Target Retirement 2035 Fund (symbol: VTTHX). I like it because of the wide diversification in domestic and foreign stocks and bonds, and there is no need for me to rebalance the assets. Plus an expense ratio of 0.21% is nearly impossible to beat.

[sweeps]

Originally Posted by suedavids

Max out your ROTH before putting more money into other retirement vehicals. ROTH grows tax free the rest of your life. WOW!!!

This is not always the best advice. If you're in your peak earning years, you will likely do better to invest on a pre-tax basis. Plus lowering your AGI increases the chances of getting various tax breaks. In addition, pre-tax retirement vehicles such as 401(k)'s have much stronger protection against lawsuits and creditors. The Roth often does not.

[fiffer010]

Originally Posted by Sweepsplayer

Yes, I have an IRA (traditional, not Roth) at Vanguard. It was rolled over from a 401(k) at a previous job. It is entirely invested in the Vanguard Target Retirement 2035 Fund (symbol: VTTHX). I like it because of the wide diversification in domestic and foreign stocks and bonds, and there is no need for me to rebalance the assets. Plus an expense ratio of 0.21% is nearly impossible to beat.

What has been your average yearly return? Are you happy with there customer service if you have used them?

[suedavids]

Originally Posted by fiffer010

Well this is my only retirement vehicle as of now since i'm only 19.I am planning to max it out every year, although it is quite tough doing that while in college. I am glad to hear that I can transfer my Roth to a diferent custodian when ever I want, I would hate to be locked in for the next 40-60 years. My 3 options I am looking at right now are fidelity, vangaurd, and T.rowe. I am going to start out with a life cycle funf till I have enough money and research done to add real estate to my portfolio. Again, does any ne have any experience with these target retirement funds?

I would suggest opening a Roth IRA at Vanguard. Instead of the target retirement funds, you may want to enter the Total Stock Market Index fund when the market dips. Open the Roth and put your money into the Prime Money Market fund. You can put the money into the index fund if there is a pull back in the stock market. Compare these two funds to see performance. Look for market weakness to enter into stocks or dollar cost average each month.

[suedavids]

when I said compare these two funds, I meant the total stock market index and the retirement fund.

[suedavids]

Originally Posted by Sweepsplayer

This is not always the best advice. If you're in your peak earning years, you will likely do better to invest on a pre-tax basis. Plus lowering your AGI increases the chances of getting various tax breaks. In addition, pre-tax retirement vehicles such as 401(k)'s have much stronger protection against lawsuits and creditors. The Roth often does not.

If you are in a high bracket, you won't qualify for a Roth anyway. Brackets are relatively low. For instance if you earn under $60,000 you are paying about 15% federal tax. This is not much. Then the money will grow tax free for life. A 401 K will grow on your initial amount plus the 15% but will be taxed on all gains over a long period of time. My brother is a CPA and did an excel spread sheet on two senarios. The ROTH beats the traditional IRA and 401K.

If an employer matches a 401K then this is a no brainer and you need to participate. Also, many people cannot do a Roth because of income limitations. While young and earning less, do a Roth.

Each person will have to do their own math but the Roth is a total gift!!!

[fiffer010]

I'm going to go with vangaurd. I still need to do a lot of research on what funds I am going to invest in. If I make my first contribution where is the money held when it is with vangaurd? it may take me a few weeks to a few months to decide on where I want to invest it.

[suedavids]

First I think you need $1000 to open an account. Not sure but think so. I would also like you to look at this Total Stock Market Index. This represents a broad mix of stock from small, mid to large cap stocks. Thus if the market goes up, the fund goes up. Whatever the market does, your fund will do. Call vangaurd to get an application. You may want to at least open it with a money market account. Once the account is open, you can move the money within the money market to another fund. Some funds have a $ amount that you have to open with but Vangaurd is relatively low. Vangaurd also restricts how many times a year you can move your money in and out of funds so pick a fund you can stick with.

I want to quote from the book "saving fitness: a guide to your money and your financial future" You can get this free from the U.S. Dept. of labor www.dol.gov/ebsa

It talks about how important it is to start early to save. Time is a compounding factor:

Pg. 6" The sooner you start the better.
"You have one huge ally- time. Let's say that you put $1000 at the beginning of each year into an IRA from age 20 through age 30 (11 years) and then you never put in another dime. The account earns 7% annually. When you retire at age 65 you'll have $168,514 in the account. A friend doesn't start until age 30, but saves the same amount annually for 35 years straight. Despite putting in three times as much money, your friend's account grows to only $147,913."
You can start small and grow. Even setting aside a small portion of your paycheck each month will pay off in big dollars later.
You can affort to invest more aggressively. You have years to overcome the inevitable ups and downs of the stock market.
Developing the havit of saving for retirement is easier when you are young."


- Just make sure that as you are saving, you don't build up debt that offsets your savings.
Good luck and keep up the good work.

[fiffer010]

I already have the 4,000 sitting in ING, I've just been looking for a place to put it. I've alreay started to save for next years contributions and should be able to have the 5,000 for 2006 by january. I dont have any debt. I am very fortunate that my parents are paying for college and are letting me stay at home for only 200 in rent.

I took a look at the total stock market index and it looks very promising. I also like the mid-cap growth fund and PRIMECAP. My dad suggests I do about 70% stock, 20% money markey, and 10% bonds. What do you think?

You also stated that vangaurd sets a limit on the amount moves you do anually. Would oyu know how many it is?

Lastly, I wanted to thank everyone so far for all of the great advice.

[suedavids]

Vangaurd is very helpful if you call them to get the specifics about opening an account.

Now. I always think that dad's are very good advisors so his mix of 70/20/10 is good but conservative. I have been managing my childrens Roth (I made them fully contribute as soon as they can work at age 16). They have a nice nest egg already and they have been fully invested in equities. I did move them out of equities (upon Bob Brinkers sell call) for two years. The market went down I think about 30 or 40% so I was a happy camper not to loose money. Upon Bob Brinkers advice I bought back into the market in March of 2003. Since it has gone up 60%. I am a real happy camper! Since you are so young, you could be more aggressive and have a complete equity portfolio. You can take more risk at a young age. Also, as rates are moving up, bonds are not doing that great. Bonds do well when rates move down. So not convinced now is the time to go into bonds. I would also suggest that you listen to bobbrinker on the radio each weekend to educate yourself on self-managing your own money. Go to www.bobbrinker.com. He also has a recommended reading list of suggested books. You may want to start reading. He has a newletter but you have to subscribe. His recommendations have a very high rating and he called the sell signal at the highs in about 2001 (around there) and a buy signal in march 2003 to get back in the market. I have done extremely well with his recommendations and he primarily uses mutual funds to buy equities. You will also enjoy his weekend programs and learn quite a bit.
His recommendation this month (just posted today) is to either dollar cost average into the market or lump sum when the S & P (Standard and poors Index) reaches 1180. It was at this level in October and I put my kids Roth contributions in at that time. Since Oct. it has gone up 7%. So... this is not a good time to lump sum it into equities. Go ahead and open your account and at least put it into a money market within your ROTH. Identify what fund you will participate in to represent your equities. YOu may contribute monthly or wait until there is a pull back and the market goes down. Don't be anxious to jump in when the market is high. You will notice that there are pull backs. We have been in a bull cycle where the pull backs (dips) are followed by higher highs. Bob Brinker believes the S & P will get up to 1300 level. We are actually very close to that now. In OCT. I put money in at 1175 so it has had a nice little run up. Now you are seeing what is traditionally called a Santa Clause Ralley. It happens every year. Also just after the 1st of the year, additional money ususally makes its way into the market due to contributions from usually retirement accounts. NOt always but often. Just keep your attention on the markets and take advantage of weekness to buy.

Actually, I would probably have the bulk of my portfolio in total stock market index and about 5% in international. Bob's recommendation is 5% Vanguard International Growth.
This would give you a good start. Now you also mentioned that you like realestate. Vangaurd also has a REIT index Fund. It is up 11.90% this year. However; with the softening of the housing market be careful. YOu may want to wait until rates have leveled before committing money to this sector fund.

Now Vangaurd only allows you to move out of an account via internet 2 times a year. This avoids short term buying and selling (causing the fund to have more expenses). You can have as many written requests to move money if you have exceeded your two moves. It may be different for a ROTH IRA but don't think so. You really don't need to be moving money around and for sure don't chase run ups. Ask Vangaurd via phone for their policies. I really haven't found this to be a problem until this year when we have been making withdrawls for college expenses. Just work around their rules.

Hope this helps!

[gakline]

Originally Posted by fiffer010

I already have the 4,000 sitting in ING, I've just been looking for a place to put it. I've alreay started to save for next years contributions and should be able to have the 5,000 for 2006 by january. I dont have any debt. I am very fortunate that my parents are paying for college and are letting me stay at home for only 200 in rent.

I took a look at the total stock market index and it looks very promising. I also like the mid-cap growth fund and PRIMECAP. My dad suggests I do about 70% stock, 20% money markey, and 10% bonds. What do you think?

You also stated that vangaurd sets a limit on the amount moves you do anually. Would oyu know how many it is?

Lastly, I wanted to thank everyone so far for all of the great advice.

I opened my first Roth when I was 18. I chose the second most aggressive mutual fund. I figure I have 50+ years to make it back. I think you're dad has a good suggestion, but for your age, you don't need anything in bonds or money market. Straight stocks will be good.

I opened my Roth account in 1998 with the mas ($2,000 at the time). The stock market took a dive (obviously). I only lost about $500. When I finally decided to move it, I had earned most of my money back and then some.