Roth IRA Q's

[UNR.Grad]

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I have done some research and would like to know a little bit more about Roth IRAs. I want to start a Roth, but this past year I do not have much on my W2 (~$300), who can I start a Roth with for that little? For this current year, my W2 will have +4k on it. I talked with Fidelity (I like that I can link a mySmart cash account to an IRA there) and because they do not start an account for less than $2,500, they suggested I start one with them at the $200 a month automatic withdrawal. They mentioned if you over contribute, you have to withdrawal from it; will the IRS make me withdraw what I contributed over $300 before April 15th or will the first $300 deposited before April 15th will go towards last year's Roth contributions and the rest will go towards this year's?


Another question: once you start a Roth, are you bound to keep your Roth with that company for the entire investment?

 

[AndyFromMDTAXES]

For your Roth, you can contribute $300 for 2007 based on the income you're reporting, and assuming you'll have $4,000 of W-2 income in 2008, you can contribute $4,000 into a Roth for 2008. (The maximum Roth IRA contribution for 2008 is increasing to $5k.)

Up to April 15th, you can contribute money into your Roth IRA for 2007 and for 2008. Why not contribute $2,500 prior to 4/15/08, and designate $300 as a 2007 contribution and the remaining $2,200 as a 2008 contribution? You can then add to your Roth throughout the year as you see what your income will be.

When you set up a Roth, you are not bound to keep your money invested at that financial institution. You're allowed to roll that money over to another institution annually.

 

[The White Coat Investor]

The alternative is do what the law says and report your actual 2007 earnings, pay taxes on them, and put them into a Roth. One additional benefit of doing this (aside from the psychological/moral benefits of actually paying your share of our country's tax burden) is you will get social security credit toward the 40 quarters required to get social security benefits. If your income is less than a certain amount and if you're not a full time student, you can even claim the retirement savings credit and actually get money back from the government by claiming more income. I see you're predental so maybe that isn't an option.