Wow, what a mess that lady was in! I am glad you guys were able to save her.
I will be sure to shop around for a better deal for my 401k

- quote -

- quote -


When you call, just remember that as hard as they try, you will in fact be
talking to the least knowledgable employees.

So ask to speak to a supervisor.

In addition, contact the Vanguard brokerage branch. The mutual fund side of the
house may not have individual 401K programs, but the brokerage might.

If they don't, try Fidelity.

Then if they don't, go the broerkage house route, but start with the least
expensive ones first. Try one like Scottstrade first and work your way slowly
up the cost ladder until you find one that does offer the program. Schwab
probably does offer the program, so that should be the most expensive place to
try. I doubt if you will have to go to a regular full cost brokerage.

You are right that 401Ks do have an adminstrative cost factor that is
completely avoidable in a SEP. If I remember the numbers right, there is a
simplified reporting available for 401Ks of less than $5 million. That would
minimize 401K admin expenses.

I once did some work for a lawyer on behalf of his client (an artist who
marketed her own works - you could buy directly from her store just as any
dealer would have to do- and she was a very big name artist) who had a 401K
program with a well known Financial Services company that shall remain
nameless.

The basic fees were very reasonable.The only problem was that she could only
buy that Company's mutual funds which were all fully loaded. Everytime the law
required her to make a change in the 401K "agreement" the Company would prepare
a canned agreement form that all of its similar clients could use to stay in
compliance with the law. But if she chose to use that form, she paid a very
hefty fee for its use that exceeded the admin fees she was paying them as well
as what she ended up paying her lawyer for doing it himself for her.

She had gone to my lawyer friend for an estate plan and for a very small
additional fee that the lawyer paid me for my work, she was able to get out
from under the clutches of the Financial Services company while opening up a
whole world of no-load mutual funds for the investment of her funds.

Oh yes, she had paid a substantial fee for a financial plan to that firm and in
return was presented a worthless (it even referred to her son as a daughter
"pre-canned" written plan that made only three recommendations. The 401K and
that she buy a hefty life insurance policy (from them of course with the
attendant hefty premiums so that hefty commissions could be paid) to "liquify"
her estate; and a type of trust wholly inappropriate for her circumstances
because her son was 35 years old and long out of school. I forget the name of
the trust but it was one used to get funds out of one's estate for a period of
ten years so that the earanings on that trust would not be taxable income to
her but would finance a child's education and taxes at teh child'smuch lower
tax rates. At the end of 10 years, the principal reverted to her.

By the time, my lawyer friend and I finished with her case, not only did we
give her a more comprehensive workable financial plan and got her out of the
401K fee merry-go-round, he (the lawyer) also arranged her estate plan in a
manner that required not one penny of insurance and completely avoided any
estate taxes to boot. This on an estate then worth no less than $5million at
the time.

- quote -

many people do too often, not even give a thought to a potential problem and
then cry like he-- when it turns out they end up havjng to not only pay the
tax, put hefty interest and penalties that could have been avoided if they had
only asked a question in a timely manner.

- quote -


I am a contract software developer. It's actually pretty common in my
business.

This year I am working as a sole proprietor. I now have to decide whether to
open a SEP IRA or an indivual 401k.
The individual 401k sounds tempting because I read you can borrow against it
to help pay for your first home. The downside to me is that they seem to
have associated adminitstrative fees. For example, I don't see a way to open
this type of account with Vanguard.

Once again, thanks for all your help and information.

- quote -

No my employer last year did not offer a 401k.

Thanks Elizabeth. From talking to you and Paul I think I am OK and was
worried about nothing.

- quote -

The former was true. Last year I was employed by a company that offered no
retirement plan.

But this year I am self-employed so I can take advantage of the huge tax
breaks of the SEP IRA.

YIPPEEEEEE!!!!!

Paul, thanks.
Glad we got this straightened out !!!! Sound like I am A-OK!

- quote -

Elizabeth answer was partial incorrect as was mine, since I misread some of the
facts.

But at no time did I say witrhout qualification that if your oncome was toohigh
to qualify for a Roth, it would be too high to qualify for a deductible Regular
IRA contribution.

What I did say is that it would be unusual, if that were the case.

There are only two circumstances that would make that possible:

1) You were not an active participant at any time in the year in any Employer's
Qualfied plan. And Employers paying the kind of income you appear to allude to
are unlikely not to have a Qualfied Plan. To only other possibility was that
this was a new employer and you had not at any time during the year qualfied
partipate in the plan or any other qualfiedplan.

or:

2) You were not employed at all and you are making Conmtributions based on your
spouse's income and that the AGI you report on a Joint tax return was not
toohigh to disqualfiy you from making a deductible contribution.

You did not indicate you were either married or single.

- quote -

Sorry, misread your question. You cannot put Roth Contributions into a regular
IRA, whether it containes rollover money or not.

But you can put contributions into a regular IRA that you had only put rollover
money into before. There is no difference between a regular IRA and a Rollover
IRA thatis not a Roth. In fact, there really is no such thing as a Rollover
IRA. Thatis merely a convenient designation used to indicate that you put roll
over money there. It used to have significance to the extent that if you wanted
to later transfer former 401K monies that you rolled into your IRA, you could
not contaminate it with contributions. But with the last law revision,that was
done away with.

Remember this important fact: You have 1 and ONLY 1 Regular IRA. IRA means
INDIVIDUAL RETIREMENT ARRANGEMENT, not Individual Retirement Account. That
arrangement can be composed of any number of seperate accounts, designated by
you and the custodian of those accounts as IRA Accounts. But they all together
still only make up the single and only one Individual Retirement Arrangement
you can have under the law.

You may also have A Roth IRA. Just like the Regular IRA, you have only one of
those, which also can be made up of any number of seperate accounts.

- quote -

year in any employer's qualfied plan or you incorrectly told Turbo Tax you
weren't an active particpant.

Unless you are self-employed it would be highly unuusal for you to have
reportable income too high to make a Roth contribution, and not be an active
participant in an Employer's qualified plan. It would be unusual for an
Employer paying that kind of income to not have a plan.

- quote -

- quote -

Others in this group can give you more a more accurate answer to your
question than I. However, I was surprised at the answers in the reply that
you are questioning. For instance, I didn't see in your original post the
information about whether your employer has a 401k in which you can
participate. I believe this makes a difference in IRA deductibility. Also,
it is my understanding that a Roth is distinctly different from a
Traditional IRA and that one account cannot represent both types.

Elizabeth

Thank Elizabeth,
Do you agree with Paul that if my income exceeded the allowable amount for
Roth that I also did not qualify to take a traditional IRA deduction? Last
year when this happened, I had no 401k or any other retirment
invesments/deductions.

Sorry to keep asking but I was confused by his answer vs. yours.

TIA

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:kWVDc.38490$OB3.30005[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

- quote -

Wow, this seems odd to me. My understanding of a Roth is that you give up
taking a deduction today in exchange for tax free money later, when you
retire. On the other hand, the rollover money, (from a traditional IRA) is
tax deferred. So if what you are saying is true, how would anybody be able
to figure out which part of the account was taxable vs. non taxable when
retirement comes around if you can mix up Roth money with rollover
(traditional) IRA money?

Also, I did my taxes last year with TurboTax. It sure let me take the
traditional IRA deduction, so unless TurboTax is broken, it seems nothing is
wrong with me taking a traditional IRA deduction.

Are you sure you are not confusing traditional IRA with Roth?

TIA

- quote -

transfer.

On 28 Jun 2004 19:10:01 GMT, paulmaf[at]aol.com (PaulMaf) wrote:


- quote -

Here's a follow-up question.

Assume a 401k plan accepts transfers from traditional IRA and a
participant takes advantage of it, rolling his IRA to his 401k. He no
longer has an IRA.

Three years later the participant retires at age 56 and wants to
withdraw 1/2 of his 401k in a lump-sum.

In addition to taxes, would he have a premature distribution penalty
on the withdrawal from his 401k?

-HW "Skip" Weldon
Columbia, SC

- quote -

No longer true. Under the new laws almost any qualfied plan or regular IRA can
be rolled inot a new employer's qualfied plan if the new plan accepts
rollovers.

- quote -


- quote -

non-rollover equivalent.

If your income was too high for a Roth, it is too high for deductible regular
IRA contribution, unless you were not an active participant in an employer's
qualifed program.

- quote -

Are you sure? From what you say, it would not appear to be the case.

Assuming you did not qualfify for a deductible IRA contribution:
Just file an amended return, adding back the $3,000 to your income and pay the
additional tax and interest due. Instruct the custodian to transfer the
contribution to your regular account.

If you did qualify for an IRA deduction just instruct the custodian to transfer
the contributuion to the regular IRA account. Do not transfer the earnings
attributable to that contribution in the Roth.

- quote -

I believe the only "problem" is that now you won't be able to move the funds
from the rollover account into another 401k should you ever want to do so.
Otherwise, the rollover account was always the same as a Traditional IRA
anyway.

Elizabeth Richardson

My income did exceed the Roth IRA limit. Are you saying a Rollover IRA
account can be used for Roth contributions?

And yes, I did deduct the $3,000, because I thought I was putting it in my
regular (non-roth) IRA account. I just made a mistake, plain and simple. I
have 3 different IRA accounts with the same firm (Roth, regular IRA, and the
rollover).

So is there anyway to correct my mistake? I deserved to be able to deduct
the $3,000, I just made a mistake and put it in the wrong account.



"PaulMaf" <paulmaf[at]aol.com> wrote in message
news:20040627211015.04727.00000600[at]mb-m10.aol.com...
- quote -

- quote -


And, of course, you were not eligible to deduct that contribution. If you did,
you underpaid your taxes on that $3,000 and owe that tax plus interest.
If you did deduct, just file an amended return.

If you did not deduct the contribution, you have no worries whatsoever.

I have a Rollover IRA from several year's back when I rolled out a 401k from
a former employeer.

Last year, instead of putting $3,000 into my regular IRA, I notice that I
put the cash into my rollover account.

Is there a problem or tax penalty for doing this?

TIA