Can you explain a Roth IRA?

Question

Suzie Orman says you should only contribute as much as the match in your 403B. I decided I should open a Roth.

Where do I get one? How do I contribute to it, monthly, weekly? Are there any risks with a Roth? Tell me what you know please?

Answer 1

Your first answer describes a ROTH perfectly...THE BEST PLAN  our government has ever come up with for your future.

You might as well go with a full service company like Fidelity for your ROTH...you are going to be doing business with them for years, when you log on to their website, you can fill out an application on- line...then send your first check. In a couple of days, you'll have an account on-line that you can " trade" in... YOU will choose from thousands of mutual funds ( or as you progress...into individual stocks or ETFs )

The site has explanations for different kinds of investments, planning, and research to help you...AND phone numbers for a rep to help you get started.

Once you choose an initial investment, you buy it on an easy to understand " trade" tab.... your " portfolio" will then show your investment every day and it's progress...

Any time you make an investment or contribution you will recieve a " confirmation " in the mail...it will have another blank for any future contributions you want to make. It would be very easy to make it one of your monthly bills... ( but only up to the point of $ 5000. per year)

Log on and get familiar with it...once you are started and you see progress it will be an encouragement to save more. It will be growing for you for years...with NO end of the year paperwork...and NO taxes taken out when you finally need to start withdrawing.

ROTHs or something like it SHOULD be mandatory...saving YOUR OWN money for YOUR OWN future...instead of the ridiculous, loophole filled Social Security System made worse by an even uglier Tax system.

As far as your questions about " risks" and such...all that is explained in the planning sections of website of any full service investment company. I would venture to say that they are all a little " conservative", but you will learn as you go along.  

Answer 2

A Roth IRA is a great investment vehicle. They are perhaps one of the best things Congress has ever done for the individual investor.

You put your in money in (after you paid income tax on it), it grows tax exempt and once you reach 59.5, withdrawals of the entire amount are tax free. Unlike a traditional IRA, you can also make withdrawals of your CONTRIBUTIONS tax and penalty free before you are 59.5 at any time for any reason, which lets them double as a nice emergency fund.

Roth IRAs will carry market risk. They are usually funded with mutual funds or stocks, much like your 403b, so the risks and returns should be comparable.

You can open a Roth IRA yourself through any of the major mutual fund companies or brokerages (Vanguard, Fidelity, T. Rowe, etc.) or you can use an advisor to open one for you. Stay way from Variable Annuities (which your 403b may be) for your Roth IRA due to higher expenses and surrender charges...and stick to mutual funds.

Unless you can contribute the full $5000 for the 2008 tax year (contribution limits are scheduled to increase each year), you contribute the same amount MONTHLY to take advanatge of dollar cost averaging (buying less shares when they are expensive and more shares when they are cheap).