open roth ira

I love it when a plan comes together. I made some strategic dollar cost averaging investment into our company stock when it hit low this year. I know the bookvalue was much higher than the market value. The market value dipped hard on policy change regarding dividend (we’re now reinvesting into growth rather than dolling out cash for shareholders). My holdings have literally appreciated over $28K since the beginning of the month.

On that news, I’ve also opened a Roth with Vanguard, though I haven’t funded it yet. That will be a whole other goal. Consider this one in the bag!

Yup. I’ve hit the 401K contribution limit for the year. My paycheck was much higher than I prefer, and got taxed accordingly. Need to park some more dough while I still have a chance.

So the DOW just plummeted 777 points by closing bell. Wachovia was gobbled up by Citigroup. The FDIC is putting out fires left and right. Scary times for stock trading… for some. Some of us have time on their side. Some of us live well within their means. It’s buying time.

Roths are really a great retirement savings vehicles. One has access to the principle any time without penalty (since it’s after-tax contribution), and there is no tax on the drawing earnings, provided one has reached the minimum age requirement. The drawback, of course, is that Roth contributions are not tax deductible.

But, so what? Well, first a little back story:

I’ve been allocating no less than 25% of my income (and more usually 27%) tax-deferred into my 401K for the past few years. It’s piled into a good chunk of change, and saved me quite a few ducats in taxes. Also, come January, I will be gainfully unemployed (figure that out!!!) and attending school fulltime. By then, I will have squirreled up enough pocket change to float a year during school, hence minimizing loans.

So what’s the big deal? This: I can minimize future taxes by rolling over my 401K funds into an Roth while having simultaneously benefitted from past tax-deferral. And, I can do this bit by bit. There is no early withdrawal penalty if the funds are moved trustee-to-trustee into a Roth. Since I will be unemployed othewise, my only taxable annual “income” will be what I withdraw (i.e., roll) from the 401K, thus I can game the amount to minimize (perhaps eliminate) income tax on the whole roll amount.

Net effect: my entire tax-deferred account can eventually be rolled almost scottfree into a non-taxed account. WIN!

so after doing some research, it’s clear that starting a roth IRA makes the most sense at this exact moment. after we move, we’ll start a 401k too. the most important thing for me? that it’s a socially responsible fund – green, no defense spending, no weapons. so researching that is the next step.

I finally opened the account.

Managed to contribute a whopping $250(?) to it over the last 4 or 5 months.

It is slow going—but it’s going.

I also started having my work take out $200 from my check, monthly, to contribute to the Traditional IRA, that was already started via my employer.

I finally phoned TIAA-CREF, to see if I could open one, before my meeting with a financial advisor (so many months away from now!).

And I did it.

Well, at least I completed the on-line application.

It won’t really be open until I send them a check.

I’m sort of glad that the Roth accrues money, as I contribute to it - without any commitment of payroll deductions and such. However - this will probably also be a hindrance, as I’ll most definitely put less away, if it’s just up to me.

But, at least it’s started. And taking control of my finances makes me feel good. I guess.

Since, my mother’s of close-to-retirement age, it’s weighed alot on my mind. She worries a lot about how she’ll get by. And she actually has an EXCELLENT retirement plan. Started when she was 21.

I figure, if she’s worried, even with an excellent plan, I better start doing AT LEAST a little something for myself.

So yeah. I guess it feels good.

I suppose it would feel better, if I could actually afford to put some money away, without feeling it!

At least I made an appointment with TIAA-CREF, so I can start discussing my finances with a Finance Professional.

Unfortunately—they couldn’t fit me in, until DECEMBER 7th!

In the mean-time, I’ve actually started reading my free subscription to MONEY magazine. (For months, I they just piled up, until I tossed them into the Recycling Bin.) And I’m watching Money/Personal Finance Programs to learn as much as possible. (I know every one hates you—but I love you, Thank you Suze Orman.)