I recently setup two Roth IRAs with Tradeking.com. After some debate, I have decided to withdraw $8000 from my savings account so that I can fully fund both IRAs for 2006. While I dislike the idea of depleting my emergency fund, I HATE the idea of missing out on 2006′s contributions. If you’ve ever wondered, here are the Roth IRA contribution limits for the next few years:
| YEAR | AGE 49 & BELOW | AGE 50 & ABOVE |
| 2006 | $4,000.00 | $5,000.00 |
| 2007 | $4,000.00 | $5,000.00 |
| 2008 | $5,000.00 | $6,000.00 |
| 2009 | Plus $500 | Plus $500 |
The limit for 2006 is $4000. (The fiscal year for contributions runs from April to April, so I have until April 17, 2007 to make my 2006 contributions.) My wife has a Roth, I have a Roth, so our COMBINED 2006 contribution limit is $8000. I sent in $800 last week, and I just transferred $7200 from my ING Direct account to my checking account. I will now send two checks for $3600 apiece to Tradeking, one for each Roth IRA.
I will work VERY, VERY hard to re-fund my ING Direct Savings account. I will treat this depletion of my savings account like a “debt” to myself. I will use my trusty “debt reduction” techniques to “re-pay” myself.
(If you are thinking about opening a brokerage account, I really like Tradeking. I’ve found that their customer service is pretty awesome. Read this post over at My Money Blog about how to get $100 for signing up with Tradeking.com.)
Are you going to pay yourself interest? Or is this a zero% loan? (And no I’m not joking.)
Umm… Do you mean that when I put the money back into the emergency fund, will I also put the “interest” back that I would have earned? Well, the money is still “mine” and is earning the same amount of interest (but untaxed!) in my Roth as it was in my ING Direct account.. so probably not… I’ll just build my ING back up to my six month “comfort level..”
Trust yourself to pay yourself back…
I am talking with a friend about this who likes to have the comfort of $10,000 in her savings, rather than $6,000 in her savings and $4,000 in her Roth….I am finally getting to her that if she begins to fund her Roth IRA this year [first year doing so] in full from her savings, she can start working towards next year’s contribution limit.
Doing what you did, will allow you to get a good jump start on next year! I think its a great idea. Maybe by THIS December, you will have tucked away the full amount for 2007 and as of January 1st you can start even more advanced by sending in money for 2008.
Once you get ahead, its a great feeling.
Congrats on funding you and your wife’s Roth IRA. This is a necessary step that everyone should take if eligible. I have a question about Tradeking’s fees though. Since I have an account myself, I found out it costs $15 per mutual fund trade in your Roth IRA. How do you plan to invest the cash? Because the mutual fund fees would surely eat away at your gains, unless you contribute only lump sums in the future.
I have an account with Fidelity, and although they don’t offer every single fund transaction free, there’s like 1200 that cost nothing to buy into. Sounds like my kind of deal.
To help others find suitable places to open their Roth, I collected a ton of Roth IRA brokers to select the Best Roth IRA Accounts out there. I hope this helps others as much as it helped me.
Good luck with your Roth IRA! It’s 2007 season already.
Investing Blog,
I do not use mutual funds… I purchase ETFs.