Retirement Planning
Ask MAX: Should I Invest in a Loaded 401(k)?
Yousef from Idaho asks:
I recently started my first job that has offered a 401(k) plan, and I was very excited to begin investing. The problem is, the funds in the plan are load funds, and after being a fan of your site I know that load funds should be avoided at all costs. Should I invest in my company's loaded 401(k) plan?"
We've reviewed hundreds of 401(k) plans for our Private Management clients and for investors who have used our MAXadvisor 401(k) Planner service. While many of those plans offer funds that normally charge a sales load to investors outside of tax-deferred accounts, the vast majority of those plans waive the regular load charge to people who invest through a 401(k) plan. We've often seen Templeton funds offered without a load charge through company-sponsored retirement plans that would cost investors 5.75% if they bought it at Etrade outside of their 401(k).
There are, however, some very lousy 401(k) plans out there that do, inexplicably, force participants to pay load charges. The dubious rationale behind paying load charges is that some investors need help choosing the funds that are best for them from the ten-thousand plus funds available. How this rationale holds up in a 401(k) plan in which investors have limited choices is beyond us. ...read the rest of this article»
Ask MAX: Can I convert my regular IRA to a Roth IRA?
Holly from Santa Fe asks:
Can I convert my regular IRA to a Roth IRA, and should I?"
First, let's tackle the "can you" part of your question, then we'll move on to the "should you".
Can You? The answer to this question is relatively simple to determine. You can convert from a regular to a Roth IRA if your adjusted growth income is below $100,000. That figure applies to both single filers, married couples filing jointly, and heads of household.
If you're married and you're filing separately, you're out of luck. Rules concerning conversions specifically forbid married persons filing separately from converting their IRAs.
That's about all there is to the "can you" part. But now things get a bit more complicated. ...read the rest of this article»
Ask MAX - Are Roth IRAs Too Good to be True?
Daria from North Carolina asks:
I can't seem to find a clear description of how the tax implications work with Roth IRAs. I understand that what I put into the ROTH is never taxed. Please correct me if I am not understanding that correctly.
My confusion is in the capital gains and distribution of dividends into the ROTH account. Are gains taxed? It would seem like too much of a plus for the investor if they (gains) were not taxed. I have been to several web sites to find a clear definition of the ROTH itself before I commit to opening an account."
Roth IRA's have only been around since 1997, when the Senate passed the Taxpayer Relief Act. The differences between a regular IRA and a Roth IRA are significant, and choosing the one that's right for you could have a big impact on how much money you end up with in your golden years. Please keep in mind when reading this that IRAs are a concept originated by the United States Government and hence are rife with ins, outs, and what-have-yous.
Are Roth IRA's too good to be true? Well, they are pretty terrific. ...read the rest of this article»
Ask MAX: A Fee-Free IRA?
Randy from Ohio asks:
I want to get an IRA started for my wife and I this year. I understand we can contribute $8,000 between the two of us. I have read several sources stating that a self-directed IRA will allow me to keep more of my money.
I have had no problem finding brokerage firms to set up IRAs, but how do I go about doing this without paying a broker? Also, many mutual funds have minimum investments of over $8,000. Are these funds out of the question for me?"
Individual Retirement Accounts were established by an act of congress in 1974, and have been confusing the heck out of individual investors ever since. With no less than eleven distinct varieties of IRAs, ever-shifting contribution limits and distribution formulas you need a degree in advance mathematics to understand, it’s no wonder we're all occasionally left scratching our heads. ...read the rest of this article»