An Interesting Financial Tool

**reason** · July 1st, 2004, 10:38 AM

I haven't yet set up a Roth, primarily due to laziness. But now that I no longer contribute to my 401k (because the evil Fifth Third Bank runs it, and my company doesn't match funds) I plan on opening a Roth soon.

One of the nice things about a Roth is that after a certain period of time one can withdraw the money put in (but not the interest or capital gains earned on it), so there is that added feature of liquidity.

**gae** · July 1st, 2004, 12:05 PM

Originally posted by reason:
I haven't yet set up a Roth, primarily due to laziness. But now that I no longer contribute to my 401k (because the evil Fifth Third Bank runs it, and my company doesn't match funds) I plan on opening a Roth soon.

One of the nice things about a Roth is that after a certain period of time one can withdraw the money put in (but not the interest or capital gains earned on it), so there is that added feature of liquidity.

Five years.

**reason** · July 1st, 2004, 12:18 PM

Originally posted by gae:
<blockquote>quote:<hr />Originally posted by reason:
I haven't yet set up a Roth, primarily due to laziness. But now that I no longer contribute to my 401k (because the evil Fifth Third Bank runs it, and my company doesn't match funds) I plan on opening a Roth soon.

One of the nice things about a Roth is that after a certain period of time one can withdraw the money put in (but not the interest or capital gains earned on it), so there is that added feature of liquidity.

Five years.<hr /></blockquote>Thanks. I couldn't remember off the top of my head.

I'm thinking I contribute to a Roth for about 5-7 years, then remove my contribution to exercise options of my company stock before they expire (I have 10 years to exercise). That way I get the Roth thing rolling, and I have the funds available to invest in what should be stocks with at least a 5% dividend yield as the options expire.

It's just a way to keep my options open (pun intended). Usually liquidity comes at a price. This way, one can maintain liquidity and not necessarily pay the price...

Though I'm not sure what happens if you take a loss on the sale of stocks in an IRA(something I probably wouldn't do anyway).

Please feel free to correct my line of thinking if I'm wrong.

[ July 02, 2004 08:33 AM: Message edited by: reason ]

**cincygreg** · July 1st, 2004, 01:42 PM

if you look at the left collomn of the site you will find access to calculators for all kinds of investments.

With Grennspans slight interest rate bump, and the forecast for a gradual climb in that area, it may make more sense fopr those who have been "puting things off a bit" to become players in this area.
Plus, it's kinda [img]cool.gif[/img] to see where you will be fiancially when it's all said and done.

[img]tongue.gif[/img] [img]cool.gif[/img] [img]smile.gif[/img]

**reason** · July 1st, 2004, 02:43 PM

With Grennspans slight interest rate bump, and the forecast for a gradual climb in that area, it may make more sense fopr those who have been "puting things off a bit" to become players in this area.

That made no sense.

**cincygreg** · July 1st, 2004, 03:48 PM

A ROTH IRA calculator.

Same one the use on the US Chamber site. (easier link)

IRA CALCULATOR

You'll be surprised how a small adjustment in what you put in can make a HUGE DIFFERENCE in what you get out of it.

[img]tongue.gif[/img] [img]cool.gif[/img] [img]smile.gif[/img]

**gae** · July 2nd, 2004, 03:02 AM

Your thinking makes sense to me, reason. If you want, I can hook you up with Trav's financial advisor (and now mine); I'm sure he'd be glad to answer questions.

**reason** · July 2nd, 2004, 11:47 AM

Originally posted by gae:
Your thinking makes sense to me, reason. If you want, I can hook you up with Trav's financial advisor (and now mine); I'm sure he'd be glad to answer questions.

I know some of what I said didn't make sense, but that's partially because I'm still thinking the whole thing through.

I don't like my 401k because 1) it's through 5/3, 2) my investment options suck, 3) I can't move the money as long as I'm with my company.

So I'm thinking the Roth is a good way to build some tax free income yet still have the monies available to exercise the options at the most optimal point. At 10yrs the dividend yield on the exercise price should generally be around 5% at least.

As I said, I'm not sure how losses and gains on sale of securities are accounted for in the Roth. This is me being stupid here - is it a net basis of all securities in the Roth or is it done on a security by security basis?

Who is your financial advisor? Just curious. I have 4 CFAs and a CFP at my immediate disposal every day, plus a ChFc, but it's always nice to get outside opinions.

For the record, I am so *not* high net worth.

**gae** · July 2nd, 2004, 07:36 PM

To the best of my knowledge (limited), the cost basis is on a security by security basis. Just like anything else.

I'll pop you an email with the FA info.

Roth IRA 101

**reason** · July 2nd, 2004, 08:19 PM

Originally posted by gae:
To the best of my knowledge (limited), the cost basis is on a security by security basis. Just like anything else.

I'll pop you an email with the FA info.

Roth IRA 101

Thanks for the info. It's about time I sat down and read up on it.

After going through that info, I've come to the conclusion that one can withdraw up to the net cost basis of all the securities owned without suffering any tax penalties.

The reason I read it that way is because an example was given of one person who owns two Roth IRAs. It is possible to for one to use combined net cost basis of two Roth IRA's but withdraw within that combined limit out of just one IRA, even if it violates the limit within that one IRA.

Of course, that changes the amount one can take out of the untouched IRA...or so that's the way I see it.

I'm just wondering if I'm organized to keep track of all that. My desk is one big stack of paper that I never look at...

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