I get stumped by the income limits on the investments - help

[Anonymous]

Taking some cues from different posts, I checked out the fidelity and vanguard websites. When I see something that I might be comfortable with, and try to click on "open account", they take me to a page that asks if I want to open roth/traditional etc. Don't those have income limits?

We were making 200k+ for a few years but this year, it went down to 160k. There may be more if I can pull in more work but total won't cross 180k. But the year after that, we may go over 200k.

We have 150k sitting in money market funds (on top of emergency funds) and anytime I try to figure out what to do, I get investment paralysis. My goal is to invest it for retirement. We have about 150k in 401k.

Where do I start. Shed some light for me please? Thank you.

[Anonymous]

There is no income to contribute to a traditional IRA. There are income limits for deducting your contribution to a traditional IRA on your income tax return, or for contributing to a Roth IRA. However, there is no income limit for converting a traditional IRA to a Roth IRA.

It's not uncommon for people to contribute to a traditional IRA and then convert to a Roth (and if no tax deduction was taken, and the account didn't increase in value, then no tax is owed on the conversion).

There are limits on how much you could put in each year however.

[Anonymous]

Thanks PP. That is the other issue. I can certainly contribute more than 5/10 grand a year. So can point me to any specific names where I can contribute more?

[Anonymous]

Anonymous wrote:Thanks PP. That is the other issue. I can certainly contribute more than 5/10 grand a year. So can point me to any specific names where I can contribute more?

Lots of people will be happy to take your money. If you want to invest mostly in mutual funds (which are bundles of investments) or ETFs (which are not much different, basically an artificial stock made up of a bunch of other investments) then the easiest thing to do is pick a fund family that you like-- a lot of people like Vanguard because it has the lowest fees, but T Rowe Price or Fidelity aren't bad if you want to have some "managed" funds (where someone picks stocks for you vs. index funds that hold a set of stocks meeting a criteria)-- and open an account with them. It might be called a mutual fund account or a brokerage account, or a taxable account, or some made up name they have. You can also go to Schwab and open a brokerage account with them and buy mutual funds there, but you may pay transaction fees if you want, say, a Fidelity fund.

IIRC, you can call Schwab, and maybe Fidelity, and say "I have 150k to invest, what do you suggest" and for free, or a small fee, they'll give you ideas. Or you could check out bogleheads-- a forum for fans of low cost DIY investing, esp. through Vanguard and see what they say.

[Anonymous]

There's great easy investment advice that is called some variation of "the only 3 funds you'll ever need." 1: A total US market fund; 2: An international fund; and 3: bond fund. I may have some details wrong but I read recently that vanguard.com will walk you through a few questions and make a recommendation as to which funds and % in each fund. These are low cost and not added fee funds. That's where you could comfortably put your extra/taxable money. Google "3 fund portfolio" for some background if you want. Alternatively, I'd call fidelity and tell the rep that you want low cost US/international and bond funds or ask what they recommend.

[Anonymous]

There are a bunch of "lazy portfolio" options here--

http://www.marketwatch.com/lazyportfolio?siteId=

Most of them are based on holding a small number (say 4-7) Vanguard funds-- just buy and rebalance once a year.

This guy does periodic columns explaining how they are doing--

http://www.marketwatch.com/story/everything-you-know-about-investing-is-wrong-2012-03-27