An IRA is not an investment; it is a way to invest in anything.
An IRA is not an asset you buy; it is a way to designate assets you buy.
An IRA is not a stock, bond or fund you buy; it is comprised of stocks, bonds, and funds you buy.
An IRA is not a retirement plan; it is a tool to help you make your retirement plan.
An IRA is not handled by a credit union, bank, or broker; it is a designation on your assets with your bank or broker.
An IRA is not one thing you have; it is a designation for many things you might have.

The deductibility of your Trad. IRA contribution does have to do with your access to a qualified plan through work, (how much you contribute to that plan, and how much they match) {always contribute the most your employer will match before doing anything else} It also takes into account how much you make. ie what tax bracket you are in. In my opinion if eligible always go with the ROTH because the taxes are done with and you get all the tax deferred growth tax free

that's why i went with a ROTH.. i can pull out my contributions at any time without penalty (although i don't plan to).. it's like another emergency savings account for me.. the hardest part for me is finding what exactly to invest in

I want to move my ROTH IRA to a higher interest CD with another bank but the current bank does not charge any fees for the IRA whereas the potentially more lucrative bank does. This has stymied me.

Interest - fees = your net. Calculate it out and you have your answer.

Good points, however, most people understand how IRA works. At least, I think.

But do people really consider an IRA as its own separate entity? It's nothing more than another investment account that one holds. And a very valuable one at that over the long term. I even took the time to list and compare a bunch of roth ira accounts by financial institution. You'd be surprised by how banks you can choose from, plus I'm sure I missed a bunch.

Each IRA account is not a separate entity but your overall Individual Retirement Arrangement is pretty much a separate entity. Although you are the owner of the IRA, your IRA is usually the titled owner of the IRA account. This is why you can have an unlimited number of IRA accounts but only one of any given type of IRA. Furthermore, within any given type of IRA, you are free to move money between like-titled accounts but not between IRAs.

I hope your questions don't get overlooked -- my understanding is that you can't contribute more than the limit and you have to plan your automatic contributions that way.

BUT, I would also like to know if Vanguard automatically stops you if you try to invest too much?

AND for my situations specifically, if I tell Vanguard to automatically reinvest my dividends and capital gains from the index fund I have in my IRA, does that count against my limit? (Basically, I have already invested $4,000 for this year. Do I need to tell Vanguard NOT to automatically reivest dividends and capital gains?)

Thanks

They track how much you contribute and won't let you enter an amount greater than available. They also have an easy "maximum" option that pulls in the max contribution over your desired periods. Of course, this only works if 100% of your yearly IRA contribution is at Vanguard. If you also open an E-Trade account and put $2K in, E-trade has no idea you already maxed out your IRA at Vanguard.



Reinvestment of dividends and distributions are not contributions.

Perhaps it might be better to use E-Trade as an example. You make a 4K contribution to your brokerage account. It goes into the cash portion. You can then buy stocks/etfs/funds with that money -- and sell at anytime without penalty. Sales/dividends/distributions just go back to the cash portion of the IRA account. It's not a true withdrawal unless money actually transfers out into your bank accounts. Likewise, a contribution only happens when money comes in from your external bank accounts.

2010 will be a great year for converting a traditional IRA into a Roth, I found a couple sites that have good information about this:

www.rothirahelp.com and www.rothira.com

Something that I just learned:
If you're at the income threshold for Roth IRA and an unexpected windfall pushes you over the edge slightly, you can increase your 401(k) contribution which in turn reduces your MAGI that's relevant for the Roth. It's counter-intuitive (put more into your 401(k) to allow you to put more into your Roth), but that's how it works.

Tip 1: Utilize the tax free status. Allocate your assests between different investment accounts based on their tax efficiency. Got alot of short term gain producing assests, stick them in the Roth while your put your more tax efficicent investments in a regular IRA or brokerage account.

Tip 1.1: Use the tax free status to beat the market! My personal strategy in my Roth is to own ETFs such as SPY, QQQQ, IWM, etc, and then write short term covered calls. The market price for options with less than a year to expiry reflect an assumed short term tax treatment.
This means you can 'beat the market' by around 20% compared to an investment with an assumed long term capital gains tax rate.

Tip 1.2: Want to lock in a loss, but still own the security and don't want to risk waiting longer than wash trade rules require? Because a ROTH has a different tax treatment, you can perform what is effectively a wash trade by selling in a different account, buying in the Roth, then after the wash time period has expired, selling from the Roth and buying back in the other account. (This one probably needs to be double checked, they may have closed this loophole).


Tip 2: Have extra money that you may need in the moderatw future and you don't fully fund your ROTH every year? Put the money in the Roth, but hold it as cash. If you need the money you can withdraw it, since principal can be withdrawn penatly free, if you don't end up needing the money than you took heavier advantage of your yearly contibution. Win/Win

If I establish a Roth IRA with one organization (say, Sharebuilder), can I switch it later to something like Fidelity?

Yes. You can do a trustee-to-trustee rollover. In my experience/opinion the easiest way is to contact the target institution (in your example, Fidelity) and ask them to help you through it. They are typically eager to help because they want to get your business.

Note that the source institution (in your example, Sharebuilder) may charge a transfer fee. In the case of Sharebuilder specifically, they charge $75.00 to close your account and transfer the assets to another financial institution. In my experience, the worse the financial institution is (i.e. the more you want to get away with it), the higher the transfer fee.

LOL! That's my experience too. I find the whol eidea of having to pay to close an account pathetic. It speaks volumes for the company that charges. it. $75 is one of teh highest I have ever heard of. Etrade charges $60 to close an account and even that is terrible.