Rethink Your Rollover

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Roth IRA unemployed

Question: Roth IRAs?

Ok, im unemployed, but receive tax exempt money (not disability or unemployment money). my question is, can i still open a Roth IRA?
thanks for not flinging insults guys. (sarcasm, incase you 2 missed it.)
right now, I am disabled and fighting for my life. i was asking because im getting married soon and wanted to take care of my future wife. im looking for all possible ideas, but a job is not an option at this moment.
Dont tell me i gotta pick best answer from these 2?

Answer: Wow, those answers are pretty insulting, aren’t they?? Don’t pay any attention—-tax season is stressful and they probably didn’t mean to be nasty.

Sorry for your disability. I’ve been there, trust me.

Unfortunately, the tax laws don’t give a break to folks who want to save for retirement but aren’t currently employed. You’ll be best off just investing what you can in a plain vanilla brokerage account or money market. Obviously you’ll be taxed currently on any earnings, whether it be interest, dividends or capital gains, but at least you’ll be saving and growing your nest egg.

One thing—once you get married and file jointly, if your wife has earned income and you two are under the AGI limit, you can both contribute to a ROTH then.

Best of luck to you.

Memphis attorney Vincent Perryman discusses Tax Preparation for 2009 taxes with Gus Wilson Part 2

Roth IRA requirements

Question: Can I open a Roth IRA if I have little money and no current steady income?

I am a college student and am unemployed except for a part-time summer job. I have a little money saved up but nothing huge. I looked at Vanguard but their minimum requirement for opening a Roth is $3000. I don’t have anywhere near that amount of money saved up. Does anybody know if I can open one for less with another brokerage firm? Also, can anyone recommend some firms that would be good choices and charge little or no fees? Your help is greatly appreciated.

Answer: I earn income from commissions. Its a difficult business, so some months I don't earn money because I don't see any clients.

Anyway, to open a Roth IRA, you will need some sort of employment. Either part-time or commission base like me. I open my Roth IRA through Primerica Financial Services and there is no minimum to open a Roth IRA. The mutual funds themselves require a minimum value. For each mutual fund you put into a Roth IRA, they may require a minimum investment of $250. If the value of your mutual fund falls below $250, you will need to make another investment to bring the value to $250 or above. The mutual fund or your dealer will send you a warning letter about not having enough money in a particular mutual fund and they will give you a time limit to meet this demand.

You can avoid this minimum value requirement if you choose to invest systematically, which is really another term for "Dollar Cost Averaging." This is where you make the same investment every month no matter how the market performs. The minimum amount to invest systematically is $25/month. I tell my clients to do this because this method lower the cost per share. The market always fluctuate and so in some months, you may buy lots of shares when market is down. In other months, you may buy fewer shares when market is rising. If you average them out, the cost per share is lower than investing one lump sum once a year.

The custodial fees on my Roth IRA is $20/year. It comes out of one of my mutual funds. It didn't affect my portfolio at all because some of my mutual funds had capital gains and dividends, which were all re-invested. You may choose to pay this fee by check, if you selected this option in your Roth IRA application.

I personally have Legg Mason Partners mutual funds in my Roth IRA. I like the Legg Mason Partners Aggressive Growth fund because it earn an average rate of around 14% in the past 10 years. I also own couple others. You should read the fund's prospectus before investing into these mutual funds.

When you pick your mutual funds, now you need to invest your money. In all IRAs, there is maximum contribution limit in any given year. Every year it changes. Right now its $4000 if you are below the age of 50. In 2008, it will be $5000. If your income is below $4000, then you can not contribute more than that. For example, lets say you only earn income of $3000 this year. You can only contribute up to $3000 for that year, even though the maximum contribution limit is $4000. The IRS is very strict about this rule and if you break it, expect to pay excess contribution fees or income tax on the excess contribution.

Good luck in investing. Check out the link below to see my research about IRAs and mutual funds and some other stuff.

Should You Convert Your IRA To A Roth IRA?

ira rates 2009

Question: How are lump sum IRA withdrawals taxed by the IRS?

How are lump sum withdrawals taxed by the IRS?
My sister has inherited an IRA (not Roth IRA).
She wants to use her option of withdrawing the entire amount and paying taxes on it on her 2009 return.
How is this taxed?
Is it taxed at the regular capital gains rate?
Why is it taxed at all, if it falls under the $600,000 thresh-hold of non taxable inheritance?
on 600,000, I meant the first 600,000 of an estate is tax free to the beneficiaries.

Answer: She'll pay income tax at whatever her rate is depending on her total income incluidng the IRA withdrawal.

It's income tax, not estate tax, so the non taxable inheritance threshhold has nothing to do with it - she has to pay it because it hasn't been taxed yet, it went into the IRA pretax, so is taxed when it comes out. And no it isn't capital gains rate, it's ordinary income rate.

December 11, 2009 Mid-Day Metals Review