Questions about Roth IRA

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INTRESIS
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Questions about Roth IRA

Post by INTRESIS »

I'm 28 years old, and I want to open a 2015 Roth IRA. I was thinking I could wait until early next year to open it, but apparently that is not the case. I looked online, and I found that "Assuming your IRA was opened by Dec. 31, 2015, you have until the tax filing deadline–April 15, 2016–to make a 2015 contribution." So, it looks like I have to open it sometime within the next 2 months. I have some questions before I open it:

1) What is the best discount brokerage firm to open a Roth IRA with and why?
2) What is the best high-maintenance option for a Roth IRA?
3) What is the best low-maintenance option for a Roth IRA?
4) I want to fully max out my Roth IRA at $5,500 every year. Is it an option to auto-pay $458.33 from my credit card or bank account every month?
5) I noticed that the lowest fund option to start out a Vanguard Roth IRA is the Star Fund at $1,000, and then additional funds are $3,000. How do I then max out my Roth IRA at $5,500 if additional funds are in $3,000 increments?
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rob
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Re: Questions about Roth IRA

Post by rob »

1 - Why do you want a brokerage? It's a valid option but it has to fit into your overall plan.
2 & 3 - I don't know what you mean by high/low maintenance. If you mean how much effort, something like a target fund can be a great option (no need for brokerage for that).
4 - I doubt anyone takes credit cards but you could certainly can do an auto transfer. Keep in mind that it's time in the market, so consider making the full amt towards the start of the year - if you can obviously.
5 - One fund at a time.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
kaneohe
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Re: Questions about Roth IRA

Post by kaneohe »

That opening by end of yr date is a surprise to me. Here's another opinion:

"If you find a Roth is the right IRA for you, you have until the April tax-filing deadline to open one or contribute to your existing account and have it count toward the prior year's limit. After that, the money will be counted as a contribution in the next filing season."
http://www.bankrate.com/finance/taxes/r ... -they.aspx

Read more: http://www.bankrate.com/finance/taxes/r ... z3qUcjCPzz
Follow us: @Bankrate on Twitter | Bankrate on Facebook
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BL
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Re: Questions about Roth IRA

Post by BL »

When in doubt go to the source, the IRS. Here is one link to Pub 590-A on contributions to a Roth:
https://www.irs.gov/publications/p590a/ ... 1000231022

I didn't spot anything with the Dec deadline and haven't heard of it elsewhere. There are some other accounts that require it however.

There should be no harm in setting up the account and contributing later.
MrBachelor
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Location: Bentonville, AR

Re: Questions about Roth IRA

Post by MrBachelor »

I opened my Roth at Vanguard in Jan 2015 by contributing $5500 and designated it as 2014 money. I have since added another $5500 for 2015 contributions. YMMV
Phylomath
Topic Author
INTRESIS
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Re: Questions about Roth IRA

Post by INTRESIS »

I got that quote from http://www.rothira.com/roth-ira-rules

Maybe that info is wrong.
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David Jay
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Re: Questions about Roth IRA

Post by David Jay »

I would put everything into one fund until you have enough to reach the Admiral level ($10,000) for each new fund. So for the first few years, all purchases should go into one fund.

I like the "Target Retirement" funds - the date on the end is your target retirement date, such as TR 2040, etc. They give you total US stock market, total International stock market and total bond market in a single fund.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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David Jay
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Re: Questions about Roth IRA

Post by David Jay »

From your original post, I wonder if it is clear. The contribution amount is the minimum to get into the fund. It is not a limit after you begin.

For example, you can buy into the Star fund for $1000. But after you make your first purchase of that fund, you can add $400 a month (or whatever you want) to that fund. You are not required to purchase $1000 "blocks" after the first purchase.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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BL
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Re: Questions about Roth IRA

Post by BL »

If you have $1k you can also start with a Target date fund. If you have $3k you can use other balanced funds such as one of the 4 Life Strategy funds or the
Vanguard Balanced Index Fund Investor Shares (VBINX) (about 60/40).

With any of these balanced funds you simply add in small increments if you wish until you have the max allowed. Later if you want the 3-fund portfolio simply exchange your single fund for 3 separate funds. It probably doesn't make sense until you have enough for Admiral funds ($10k) in one or two of them.

No harm in starting with all Total stock market fund and when you can fill your second year you could start buying 2 or 3 separate funds with at least $3k in each.
For example your investments could then be $5k, $3k, $3k. You would have to wait a few years to get the exact % desired of each if you don't want to start with a balanced fund.
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David Jay
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Re: Questions about Roth IRA

Post by David Jay »

BL wrote:If you have $1k you can also start with a Target date fund.
That's great!

I'm a big believer in Target Retirement funds - that is where I first put my (29YO, at the time) daughter. It gives you a 3-fund portfolio in a single fund. I would definitely begin with one of these - presumably TR 2050 or TR2055.

Then you can choose to do other things (or not - some very knowledgeable investors still use TR funds) when you have 30,000 - 40,000 in your account and can purchase Admiral (lowest cost) shares of each fund you own.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Bob's not my name
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Re: Questions about Roth IRA

Post by Bob's not my name »

INTRESIS wrote:I got that quote from http://www.rothira.com/roth-ira-rules

Maybe that info is wrong.
Here's another great quote from that site:
When it comes to a Roth IRA, “rules” is a subjective term.
The site contains other errors. Don't use it.
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