Okay folks, my wife and I are going to get serious about my long-term investing. We want to open an IRA because I've heard they are the best way to go (over a 403b or mutual funds). But how and why? Are they all "Roth" or is that just one type? My insurance company offers them, but would is there a way for me to open one privately to save on brokerage fees (or whatever you call 'em)? Teach me!!

There are two types of IRAs. Roth and Traditional. The bottom line is, you can't deduct the interest earned on a Traditional IRA if your company offers a pension. The money would be taxed as ordinary income upon withdrawal. And, a Traditional IRA can't be established if you make over X amount (I don't recall what X is).

The Roth is adventageous because there is no deduction for the contribution. Meaning all the gains come out tax free when you begin withdrawing them after the age of 59 1/2. Roth is the way to go if your company offers a pension.

Currently, for 2005 (and through tax year 2007) you can contribute $4,000 per person into either a Traditional or Roth IRA. 2008 and beyond you can contribute you $5,000 (or until the IRS changes it).

I was stumbling for proper word choice...did some research and this sums it up very nicely:

Bottom line is, how aggressive do you plan on investing within that IRA? If your expected rate of return that you invest in is 18% annually and you let that interest compound, then you most definitely want the Roth! Let that money multiply tax free! Granted you're paying the tax upfront as determined by your tax bracked (likely 25%), but who knows what the IRS will do down the road with capital gain taxes on IRAs. I say, go for the Roth. It'* what we invest in.

And, do you currently have a pension? If you do, you can't use the Traditional. Bottom line.

Yes I have a state pension, so that limits me to Roth. How about where to open them? Through my insurance agent? Roth.com? What are my options there?

Well, anyone who sells them, basically. Much like anything else, shop around based on level of service, expected rate of return, and obviously price/commisions that they charge.

Mine is through a certified financial planner. I think she hits me for $10 every year on each plan (mine and my wife'*). Could be better, could be a lot worse. But I'm comfortable with her and she'* never given me shady advice.

Any broker should be able to sell you an IRA, or at least point you to someone that he/she recommends. If you'd like, PM me and I can hook you up with my lady. She'* out of Dearborn, MI. I've only met her once, but had numerous phone conversations with her. I was referred to her by my uncle who lives in FL. He'* never met her in person.

scottydl
Congratulations for doing something for yourself. You are on the right track. I am assuming, I know I shouldn’t do so, that you are a younger guy with a lot of years before retirement. You should seek out professional help but try this link and take some time and poke around the site. http://www.kiplinger.com/planning/retirement/

I will give you two of my favorite sayings about investing.
Nothing beats time and compounding interest. I started to save for my retirement at age 16 and continue today at age 55.

There is only one thing worse than being old in America and that is being old and poor in America.

Invest in yourself invest for your retirement.