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Small windfall - ROTH questions
Old 11-06-2011, 09:20 AM   #1
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Small windfall - ROTH questions

Well, it looks like I am finally going to take the plunge into Roth IRA's - however, I am only 50% sure of "why" (tax exempt gains).

I can max out contributions to the Roth as well as my TSP/traditional 401k. (this will be doable for the foreseeable future - at least until retirement in 2020)

Looking for recommendations on Roth brokers - new account with Vanguard - or should I just click on the "open a Roth IRA" link with either USAA, ING, or Navy Federal or Chase...

Thank you!
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Old 11-06-2011, 10:10 AM   #2
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Originally Posted by Fireup2020 View Post
Well, it looks like I am finally going to take the plunge into Roth IRA's - however, I am only 50% sure of "why" (tax exempt gains).

I can max out contributions to the Roth as well as my TSP/traditional 401k. (this will be doable for the foreseeable future - at least until retirement in 2020)

Looking for recommendations on Roth brokers - new account with Vanguard - or should I just click on the "open a Roth IRA" link with either USAA, ING, or Navy Federal or Chase...

Thank you!
There are no mandatory distributions for Roth IRAs. If you do not need the money you can leave it, also it is easier to manage taxes.

I like Fidelity brokerage.
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Old 11-06-2011, 11:09 AM   #3
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Originally Posted by Fireup2020 View Post
Well, it looks like I am finally going to take the plunge into Roth IRA's - however, I am only 50% sure of "why" (tax exempt gains).

I can max out contributions to the Roth as well as my TSP/traditional 401k. (this will be doable for the foreseeable future - at least until retirement in 2020)

Looking for recommendations on Roth brokers - new account with Vanguard - or should I just click on the "open a Roth IRA" link with either USAA, ING, or Navy Federal or Chase...

Thank you!
If you want to buy CDs, Navy Fedreal is likely much better than any stockbroker at present. However, if you want equities or ETFs, maybe go wherever you have your brokerage. I agree with Michael, Fidelity seems to do a very good job in this area.

Ha
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Old 11-06-2011, 11:16 AM   #4
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Looking for recommendations on Roth brokers - new account with Vanguard - or should I just click on the "open a Roth IRA" link with either USAA, ING, or Navy Federal or Chase...

Thank you!
It all depends on how you want to invest the money. If you plan on leaving it very liquid in savings/cd's than than the banks and credit unions would be fine. That's not to say they don't have brokerage services, but, you'd need to look at what they offer in terms of investments and their fee schedules.

I like to keep things simple. I have my Traditional IRA and Roth at the same broker. Vanguard is a fine company, you might want to do something similar.

-- Rita
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Old 11-06-2011, 11:17 AM   #5
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There are no mandatory distributions for Roth IRAs. If you do not need the money you can leave it, also it is easier to manage taxes.
+1

My Roth is with VG, DW's is with Fidelity.
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Old 11-06-2011, 11:31 PM   #6
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Originally Posted by Fireup2020 View Post
Well, it looks like I am finally going to take the plunge into Roth IRA's - however, I am only 50% sure of "why" (tax exempt gains).
I can max out contributions to the Roth as well as my TSP/traditional 401k. (this will be doable for the foreseeable future - at least until retirement in 2020)
Looking for recommendations on Roth brokers - new account with Vanguard - or should I just click on the "open a Roth IRA" link with either USAA, ING, or Navy Federal or Chase...
Is earned income considered a "windfall" if you had to work darned hard for it?

I don't know if this will happen before the April 2012 contribution deadline, but the Roth TSP is supposed to start up right around that time. You could open a Roth account with USAA or NFCU, stuff it with your 2011 contribution, and then roll it over to the TSP when they finally get it up and running. Everyone else might fuss at you about minimum balances.
TSP withdrawal options | Military Retirement & Financial Independence

I think one of the most critical reasons for a Roth IRA is avoiding RMDs. With your military pension and your state civil-service pension (and your future Hallowe'en costume winnings!) you could very well be in the 25% tax bracket even before you get hit with an RMD.
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Old 11-07-2011, 07:21 AM   #7
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I don't know if this will happen before the April 2012 contribution deadline, but the Roth TSP is supposed to start up right around that time. You could open a Roth account with USAA or NFCU, stuff it with your 2011 contribution, and then roll it over to the TSP when they finally get it up and running.
Nords,

From what I've read, it doesn't sound like participants can transfer Roth money into the Roth TSP once it gets up and running around 2nd QTR 2012 (FAQ on new Roth TSP - FederalNewsRadio.com). It also looks like there will be RMDs with the Roth TSP...of course, one can just roll that money over into a Roth IRA when they approach 70 to get around that.
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Old 11-07-2011, 01:10 PM   #8
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Once you've maxed out your 401k, a Roth is a great place for what would otherwise go into your taxable accounts. I have Roth's at Fidelity, E*Trade, and DW's 401k account. All of them offer a slightly different mix of no transaction fee funds, as will Vanguard. E*Trade has a lower minimum for mutual funds, so you can diversify a little better there with a small Roth account.
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Old 11-07-2011, 01:53 PM   #9
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From what I've read, it doesn't sound like participants can transfer Roth money into the Roth TSP once it gets up and running around 2nd QTR 2012 (FAQ on new Roth TSP - FederalNewsRadio.com).
Well, geez, that sucks. Where else can military/federal invest in funds with 0.03% expense ratios?!?
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Old 11-07-2011, 05:39 PM   #10
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From the link above:

"Is the contribution limit for the Roth TSP the same as the traditional TSP?
The current contribution limit is $16,500. This limit will remain $16,500 between the Roth and traditional TSP."

Am I missing something? Though the Roth contributions were after-tax AND in ADDITION to the limits of $16,500 for 2011? ($17,000 for 2012)

@ Nords - my windfall is not income - inheritance...just spreading the $$$$
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Old 11-07-2011, 05:49 PM   #11
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From the link above:

"Is the contribution limit for the Roth TSP the same as the traditional TSP?
The current contribution limit is $16,500. This limit will remain $16,500 between the Roth and traditional TSP."

Am I missing something? Though the Roth contributions were after-tax AND in ADDITION to the limits of $16,500 for 2011? ($17,000 for 2012)

@ Nords - my windfall is not income - inheritance...just spreading the $$$$
If it's the same as 401k, which it sounds like, the $16,500 limit is for traditional and Roth combined. Though Roth IRA is still available for me, if income is low enough, for a smaller Roth contribution.
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