More IRA Tips

After publishing my last blog post about it not being too late to make a 2010 IRA contribution (you have until April 18, 2011), I realized that there is more information that could be useful in making the decision about whether or not to do so. Even if not relevant now, this information may be useful to you in the future.

2010 IRA Contribution: It’s Not Too Late

You have until April 18 to make your IRA contribution for 2010. If you don’t have an IRA yet, now would be a great time to start one. If you can afford at least $1,000, you can open an IRA account at Vanguard and use their STAR fund, which invests in both stocks and bonds. With $3,000, you can choose from most other Vanguard funds. It only takes about 10 minutes to open an IRA account online at Vanguard, and you can have the money electronically transferred from your checking or savings account into your new IRA account. If you can’t afford $1,000, then you can open an IRA at Schwab with as little as $100, and you should be able to do so in a few minutes online; Schwab offers a few good low-cost index mutual funds and ETFs. Don’t hesitate to pick up the phone and call the Vanguard or Schwab representative if you need help.

Tax Reporting Basics for Taxable and Tax Privileged Accounts

As an investor, you should understand the difference between your taxable and tax privileged accounts with respect to tax reporting.  I've noticed that novice investors sometimes get confused about this, especially when they have both taxable and tax privileged accounts at the same financial institution (e.g., Vanguard, Fidelity, Schwab, etc.).  For example, they may hold the same mutual fund in both a tax privileged and taxable account, and they wonder why they got a 1099 tax form for one and not the other.  This article doesn't get into details about tax reporting for earnings from taxable accounts, but just tries to distinguish between tax reporting for taxable and tax privileged accounts at a high level.

IRAs: Traditional vs. Roth, Part 2

I'm always trying to learn more about investing, and although much of what I read covers material I already know and understand, sometimes I run across information that increases my understanding significantly.  I recently ran across a couple of articles on IRAs on moneychimp.com (mentioned in my last post on useful investing websites) that increased my understanding of the tradeoffs between traditional and Roth IRAs.  Based on what I read, I started working on a spreadsheet to further deepen my ability to analyze the tradeoffs.  Based on this work, I revised and added to my original post on IRAs: Traditional vs. Roth (December 16, 2009).  For those who may have already read it, I'm repeating the main additions to that post here, in case you don't want to reread the original article.  I'll also include some examples to demonstrate the tradeoffs.

The Ideal 401(k) Plan

This is just a quick post to share what I personally would look for in a 401(k) plan.  Since it's unlilkely you'll be able to influence your 401(k) plan once you're hired, the main point of this post is to help you evaluate potential employers' 401(k) plans as part of your job selection process.

IRAs: Traditional vs. Roth

There are lots of detailed regulations for Individual Retirement Arrangements (IRAs), so to really dig into it, you should read the relevant sections of IRS Publication 590 (html version -- see the PDF Version if you prefer the format used for the printed publication) which covers IRAs in depth.  On the second page of the html version or page 5 of the PDF version, there's a table that summarizes differences between Traditional and Roth IRAs.  I'll summarize some of the differences and similarities here.

Investment Account Basics

In my Facebook note version of this article, someone asked the following questions with regard to the investments I've been discussing:

1. Can you pull your money out at any time?
2. If so, do you have to pull out all of your money or can you pull out certain amounts still? I'm guessing as long at the minimum investment is still there you can pull out some money...am I right?
3. Do people invest in these funds for more of a long-term investment vs short-term?

For the answers, read on ...