No Fee Roth IRA recommendations

[kyounge1956]

I want to start a Roth IRA account. I have a small traditional IRA that I started years ago which I wish to convert to Roth, and I also want to roll over my current Roth to a different custodian. I'm looking for an account with no annual fee—right now the annual fee eats all the interest from the small old IRA. I have to be able to start the account with $500 (or $1000 if I can count the traditional IRA I want to roll over also), because I have already set up contributions for the rest of this year's maximum to my other IRA. Ideally, the custodian would be someplace that can eventually receive the rollover of my 457 plan from work, which won't go into a Roth, at least not immediately.

I am looking for recommendations for where to open the account, and info on how to do the conversion. I haven't checked all the links in the Roth conversion FAQ yet. Is there a specific one that covers "how to convert" rather than "why to convert"?

 

[mickeyd]

I have to be able to start the account with $500 (or $1000 if I can count the traditional IRA I want to roll over also), because I have already set up contributions for the rest of this year's maximum to my other IRA.

Most of the larger MF firms (Vanguard, Fido, TRP etc) have minimums that are above $500. Vanguard has only one fund (STAR fund) that has a $1000 IRA minimum. Generally you can not "count" the $500. I do not understand what the last part of your sentence has to do with this, but maybe I'm dense today.

 

[LOL!]

Look into using TRowePrice and their automatic investment plan. Also check out TDAmeritrade. With the latter, you will probably want to use a no-transaction fee fund (which won't necessarily be a low-expense-ratio fund).

 

[Nords]

I want to start a Roth IRA account. I have a small traditional IRA that I started years ago which I wish to convert to Roth, and I also want to roll over my current Roth to a different custodian. I'm looking for an account with no annual fee—right now the annual fee eats all the interest from the small old IRA. I have to be able to start the account with $500 (or $1000 if I can count the traditional IRA I want to roll over also), because I have already set up contributions for the rest of this year's maximum to my other IRA. Ideally, the custodian would be someplace that can eventually receive the rollover of my 457 plan from work, which won't go into a Roth, at least not immediately.
I am looking for recommendations for where to open the account, and info on how to do the conversion. I haven't checked all the links in the Roth conversion FAQ yet. Is there a specific one that covers "how to convert" rather than "why to convert"?

Depending on the amount of the conventional IRA you may want to try Fidelity. You could transfer the conventional IRA to them, convert it to a Roth, and make contributions to whichever.

I think Fidelity would be happy to accept custody of a 457, and you may be able to motivate them by asking about it.

Otherwise T. Rowe Price is very happy to have a low-balance IRA, although they'll charge $10/year for balances under $10K. (Our kid's Roth IRA is with TRP.) They may waive that fee for monthly EFTs or some other reason-- it's worth calling to ask.

I don't remember a specific "how to convert" thread, although the FAQ link below includes a link to Fairmark's Roth IRA website. If you're with Fidelity, you call them up and tell them what you want to do before December 31, they do it, and they send you the conversion tax form 1099-R. (You may even be able to do the conversion online instead of having to make a phone call.) Then you add that form's info to form 8606 on your tax return. You probably also have to do something about state taxes.

Depending on the basis of your IRA and the tax bill you'd owe, you may also need to pay federal/state estimated taxes at the next quarterly installment. Otherwise you'll be hit with a penalty & interest when you do your tax return.

Here's some links:
http://www.early-retirement.org/for...vert-my-ira-401-k-to-a-roth-or-not-30664.html (many more links in this archive)
Ed Slott's IRA discussion board: Ed Slott's IRA Forum :: Index

 

[Madison]

I started my bro-in-law and sis-in-law at Scottrade with $200 each. They only had to pay $7 to buy an ETF fund. Once they have enough, I'll move them to Vanguard.

 

[kyounge1956]

Most of the larger MF firms (Vanguard, Fido, TRP etc) have minimums that are above $500. Vanguard has only one fund (STAR fund) that has a $1000 IRA minimum. Generally you can not "count" the $500. I do not understand what the last part of your sentence has to do with this, but maybe I'm dense today.

It wasn't terribly clear, now that I read it again. The old Trad IRA I want to convert has about $500 in it. It also has an annual account maintenance fee that eats up just about all the interest it gets in a year. I also have an existing Roth IRA and my checking account automatically puts money into it every month. By the end of the year I will have put $5500 into my existing Roth, but IIRC the maximum contribution for this year is $6000 (including over-50 catchup). So I can put another $500 into a Roth IRA this year without exceeding the annual contribution limit. If I have to start a new Roth account and then roll the Traditional IRA into it, I'd have to start it with only the $500 remaining before I hit the contribution limit. If I can start a Roth and do the conversion at the same time, I could start the new account with $1000.


But now that I think about it some more, maybe the best thing to do would be to move the other Roth (which has more in it) to the new custodian and then fold the other $500 and the Trad IRA conversion into that. What I am trying to avoid is an annual account maintenance fee, and from what Nords wrote maybe I can do so by combining the old Roth, new Roth, and Trad IRA conversion into one account, which might be over the $10K limit, and/or by doing EFT, which I take it is electronic funds transfer.

 

[kyounge1956]

I think Fidelity would be happy to accept custody of a 457, and you may be able to motivate them by asking about it. (snip)

I don't think it will be more than they can cope with. In fact I think Fidelity used to be the 457 custodian for City employees when I first started my account.

I don't remember a specific "how to convert" thread, although the FAQ link below includes a link to Fairmark's Roth IRA website. If you're with Fidelity, you call them up and tell them what you want to do before December 31, they do it, and they send you the conversion tax form 1099-R. (You may even be able to do the conversion online instead of having to make a phone call.) Then you add that form's info to form 8606 on your tax return. You probably also have to do something about state taxes.

Depending on the basis of your IRA and the tax bill you'd owe, you may also need to pay federal/state estimated taxes at the next quarterly installment. Otherwise you'll be hit with a penalty & interest when you do your tax return. (snip)

No state income tax here in WA so I don't have to worry about that. I am probably going to have a refund due next year—I got a small one this year and have raised my 457 contributions since then, so my taxable income will be lower. If I have paid enough in withholding to cover the conversion (the account only has $500 in it, so the amount of tax owed will not be huge) do I still need to estimate my taxes? I've never had to do estimated that, I've always just used Form 1040 every year. I have no idea what a form 8606 is either. And what's basis? I guess I will have to go down to the IRS office and find out.

 

[mickeyd]

If I can start a Roth and do the conversion at the same time, I could start the new account with $1000.

The conversion of a traditional IRA to a Roth IRA will not affect the annual Roth contribution max of $6000. A conversion does not affect your contribution limits as I recall the rules.

 

[Zoocat]

As I understand the conversion process, you are only limited by your income as to whether or not you may convert to a ROTH. Check out the IRS on income limits. In 2011 anyone may do this, regardless of income.

I just finished converting the remainder of my IRA account at Vanguard to a ROTH, also at Vanguard. The paperwork is quite straight forward. No problem.

IMO, it's a good thing to do at this point in time if you are eligible. It's likely that capital gains and other taxes are going up; consequently, you will pay more to convert in the future.

 

[kyounge1956]

OK, I have just run into a slight complication. I decided to go with Scottrade. They were recommended by someone here and there was another thread on brokerage ratings that said they had the lowest frequency of getting their wrist slapped for questionable practices, which is another plus.

When I went to their website to open the account I discovered that I need to provide a beneficiary's Social Security number. I'm single and childless. I have two brothers and a sister, all of whom have children, but I wouldn't want just one of them to nab the whole account when the time comes. Anyway, I don't know any of their SSN's.

In the past I've put my parents down as beneficiaries, but they are both in their 80's now and that doesn't seem like such a good idea any more. So who do I designate? Is anyone else here in this situation, and if so, who did you name?

 

[riskadverse]

. . .
When I went to their website to open the account I discovered that I need to provide a beneficiary's Social Security number. I'm single and childless. I have two brothers and a sister, all of whom have children, but I wouldn't want just one of them to nab the whole account when the time comes. Anyway, I don't know any of their SSN's.

In the past I've put my parents down as beneficiaries, but they are both in their 80's now and that doesn't seem like such a good idea any more. So who do I designate? Is anyone else here in this situation, and if so, who did you name?

You can split the beneficiaries into percentages. If there are 6 children, you can specify that 16.66% goes to each of the beneficiaries. You'll have to supply the SSN's though - just call the parents and explain the situation. Don't be surprised if your nieces and nephews are a little more friendlier next time you see them.

 

[kyounge1956]

You can split the beneficiaries into percentages. If there are 6 children, you can specify that 16.66% goes to each of the beneficiaries. You'll have to supply the SSN's though - just call the parents and explain the situation. Don't be surprised if your nieces and nephews are a little more friendlier next time you see them.

Thanks for the tip on splitting between several people. I didn't notice that at first. I decided to name my three siblings and have emailed to ask for their SSNs. I hope I hear back soon so I can get this all set up and out of my hair.