View Full Version : How do I set up a Roth IRA?

12-21-2004, 07:05 PM
Could anyone with some knowledge in this area give me some pointers to where I should begin? I don't even know how to set one up but I've heard Vanguard is a good place to start. Do I basically give them a check for $3,000 and say "Here is my money, set me up."? Do I have to allocate where my funds go?

If someone has a link to a post that has a lot of info on setting them up that would be great. I couldn't find much with the search feature.

12-21-2004, 08:03 PM
If you were to start one with Vanguard, then you are limited for the most part to that fund family. I would recommend that you start one with a discount brokerage firm. HarrisDirect or TDWaterhouse for example. Through them, you have access to hundreds, if not thousands, of NTF funds (No Transaction Fee), as well as stocks, fixed income vehicles, and other investment types.

I don't know anything about your background, but make sure that you qualify for Roth IRA. There is a salary limit.


12-21-2004, 08:48 PM
This site should answer your questions:


12-22-2004, 02:51 AM
check out optionsxpress.com i just moved my accounts there

12-23-2004, 01:48 AM
Vanguard is a great place to start. Low costs and fees. Great website and annual reports. I wouldn't get fancy and start picking individual stocks unless you have the time and discipline to do some reading first about stock investing.

I started with Vanguard in 1993 or so have done fine with them. Switched to Ameritrade in 2000 or so. Just in time to take huge losses, but have since recovered and am back on track.

www.vanguard.com (http://www.vanguard.com) should be a good place to start. Or go directly to their IRA section http://flagship4.vanguard.com/web/corpcontent/scatSvcsRetIRAOV.html

Actually I think you can contribute $3,000 in 2004 and $4,000 in 2005????

Remember to check the income limits as someone below noted. If you make less than a certain ceiling (95,000 modified adjusted gross income), I think you can open one. Above that ceiling your ability to contribute is gradually phased out.

Definitely don't do option trading if you have no experience. Option trading is complex for two reasons. First, you really have to understand the underlying stock and its fundamantals and have a good idea about its long, medium, or short term performance.

Then you have to have some math sense to follow the options calculations. Most people really shouldn't bother with options.

Contribution eligibility rules
Your maximum annual contribution depends on the tax year, your filing status, and your modified adjusted gross income (MAGI). Your ability to contribute is phased out gradually.

Single filer. You may contribute the maximum if your MAGI is $95,000 or less for the tax year in which you contribute. If your MAGI is between $95,001 and $110,000, your ability to contribute is phased out gradually; however, you may contribute to a traditional IRA.
Joint filers. You may contribute the maximum per person if your combined MAGI is $150,000 or less for the tax year in which you contribute. If your combined MAGI is between $150,001 and $160,000, your ability to contribute is phased out gradually; however, you may contribute to a traditional IRA.
Select your tax-filing status to view a chart showing Roth IRA phase-out ranges for tax years 20032004.

Married filing jointly
Single, head of household, or qualified widow(er)
Married filing separately
The maximum annual contributions are increased for 2005 through 2008 and then are indexed for inflation thereafter.

12-23-2004, 02:01 AM
Also consider subscribing to some basic finance type magazines or visit their websites.

Money is fine for very basic saving and investing info re: retirement.

If you want to learn more about business and corporations so that you can prepare to study stock picking, try Business Week, Fortune, Forbes and or the Wall St. Journal and Investor's Business Daily. Check them out at the library, on websites, or just buy a few copies and decide what you are ready for.

Then maybe consider some basic books on conservative stockpicking.

As with rockclimbing and white water rafting you probably want to start out with the basics before you try any level 10, bet the farm, 5% chance of coming back alive stuff.

12-23-2004, 02:14 AM
Oh, yes, you have to select say a mutual fund or index fund, sector fund, some kind of fund to put your money in.

The thing about investing is that I think everyone should try their best to understand the basics. Some people seem to think picking a mutual fund is easy or absolves you of any responsibility to understand stock picking or the cycles of the economy.

But, really, think of it like getting brain surgery or carrot farming. You don't necessarily want to perform the surgery yourself or grow the carrots yourself, but you want to make sure you understand whether this particular mutual fund or carrot farmer picks good stocks or grows good carrots.

So you ultimately have to understand what stocks the fund manager is picking, be comfortable with his management and stock picking style, know his long term track record, etc.

A fund manager could pick Amazon and put 100% of the fund's assets into it. And do great one year, perhaps due to a tech bubble. If the bubble bursts, his fund performance may not be all that great.

So you have to know that he picked Amazon, why he picked it, whether it is a reasonable pick, etc.

Or if you think energy or health care will be a hot area, maybe put your money into a sector fund.

Etc. etc.

Also you need to start thinking about your risk aversion, stage in life, interest or ability in picking stocks and studying finance and economics, etc.

Do you want to grow your own corn, raise your own cattle, and catch your own fish, or just drive to the grocery store and buy corn and fish and precut steaks.

To me, money is so important, I want to manage my money myself, right down to picking each individual stock. But that may be a goal you want to work toward, rather than just jump right into it.