How do I set up a Roth IRA and other questions?

Question

Suzie Orman thinks a Roth IRA is a great investment, but I dont know how to go about getting one, so here are some questions
Do I make monthy contributions of say $200 dollars to a Roth or do I have to go to the bank with $5000K in my hand and tell them I want a roth?
When can the funds from the Roth be withdrawn in 10 yrs, 50yrs?
What is the maximum amount of money that can be put into a Roth in a year?
Dont send me to a website please because I already read these and they are not clear. Thank you

Also, does it make a difference in the amount of interest paid on a Roth if I buy it at the State bank vs. Holy Cow investment center?

I make about $75K a year. I decided to do a Roth after listening to Suzi Orman yesterday. I also have a 10% contribution to a 403B, but think Roth would give me a better return.

Answer 1

You can get a Roth IRA from many institutions including banks and brokerage firms (e.g. Scottrade, Fidelity, etc).

The maximum you can contribute in 2007 is $4k if you fall under some income limit requirements. In 2008 it will be $5k. You can make monthly contributions if you want or a lump sum, whichever you prefer.

The funds can be withdrawn from a Roth penalty free starting when you hit 59 and 1/2 years of age. Before that, you can actually withdraw any of the original contributions with no penalty, but if you withdraw any profit, you have to pay taxes and a penalty on that.

A Roth generally doesn't make money like a savings account where one bank's rates are better than anothers. Usually people fund their Roths by buying stocks or mutual funds within the Roth. I suppose you can simply leave it in as cash and get a very small interest rate from the firm, but that's not a good use of the money.

Answer 2

I would suggest setting up a Roth IRA account with a mutual fund company instead of your bank. It's very straightforward to set one up with Vanguard, for example
http://www.vanguard.com

But if you are too conservative for mutual funds (a pity) then whatever bank you pick will be glad to tell you how to set it up at that institution.

Most fund/brokerages/banks will allow you to contribute the money monthly or in a lump sum. But you should ask the specific institution you have picked to make sure.

Roth money is for the long-term, for your retirement, so you shouldn't plan on accessing it until you're 59 1/2 (although there are special provisions for using it to buy a house after 5 years have elapsed.) You can draw out the *contributions* (not the investment income) earlier but you shouldn't do that since it's missing the entire point of setting up a Roth IRA.

The current Roth limit for tax year 2007 is $4000 and 2008 is $5000. If you are 50+ you can put in an extra $1000 in addition.

If you have a high income you will have to review the rules to make sure you're eligible so I will refer you to one web site:
http://retireplan.about.com/cs/irasandroths/a/roth_ira.htm

Answer 3

See www.ira.com for general info on IRAs. Most banks, brokerage houses and mutual funds can set them up - it depends on what and how you want to invest within it.

Answer 4

I recommend calling Vanguard or Fidelity, or go to their websites (www.vanguard.com) or (www.fidelity.com). They're pros at the retirement issues and can handle your questions, no problem.