Friday, March 28, 2008

Of Rollover, Roth and JTWROS

Seems like it was just yesterday when we moved to the US and we had no penny to our name. We were going to depend on Al's first salary which was about 3-4 weeks away. So it was good to have a credit card then :) to buy our food and gas until he got his first salary.

That was about 5 years ago. Today, it is good to know that we have started our "retirement" savings. (I say "retirement" because with what we envision to be doing in our "sunset" years does not look like typical retirement. But anyhow, that is a different story.) It is challenging though to "manage" these retirement accounts. Here's how we are managing our retirement account:

- 401K (pre-tax contribution, tax-deferred earnings, Fidelity)- Putting away the maximum that the employer is matching. AMD matches 50% of up to 6% employee's 401K contribution. Al is putting 6% there but is actually saving 9% since AMD matches 3%. The good thing is that the AMD match is immediately vested!

- Rollover IRA (Individual Retirement Account) (pre-tax contribution, tax-deferred earnings, Fidelity) - When we got out of Micron, our 401ks with Fidelity continued but we had the opportunity to move them into Rollover IRAs for better flexibility (wider* selection (as in thousands) of mutual funds, stocks etc vs 5-10 mutual funds only). The good thing about it is that Fidelity is not charging account fees for these Rollover IRAs this year! Fidelity is also known for its great website and service, so we figured we could stay with them on the Rollover IRA so we have a basis of comparison with the other accounts we opened with the cheaper Omnium/TD Ameritrade.

- Roth IRA (post-tax contribution, tax-free earnings, Omnium/TD Ameritrade)- We qualify for a Roth - yehey!!! We decided to follow the Sound Mind Investing Upgrading method ( and this brokerage has the best deal - pay $99/year (for the 1st account, $49 for the next accounts) for unlimited* online mutual fund transactions which is key for the method.

- JTWROS (post-tax contribution, taxable earnings, Omnium/TD Ameritrade) - Joint Tenants with Rights of Survivorship - we are open to this account being a retirement account or perhaps a mid-term dream account. We're still researching how to best invest this but since this is a taxable account, we are leaning towards doing buy and hold of stocks or mutual funds. That way, we don't pay taxes on these investments until we sell, and then at the relatively lower long-term capital gains rate. So this account may be less active and the holdings are there for the long haul.

To get to which retirement (or non-retirement)account, which brokerage, which investments and how much... Had to do lots of research on the internet - the brokerage's website, Sound Mind Investing website. Had to pick up the phone and make calls to the brokerages as well to get more information or clarification from them. Had to discuss and agree with Dear Husband Al on the accounts, amounts, brokerages, investments, etc.

It's a long process for me but I feel more comfortable in our decision making process and having some rudimentary knowledge on what we are getting into.

All these means nothing though if we get enslaved by the money and the power. Earthly treasure is nice but let us not be deceived and rely on it. Our lives are in the hands of the God. He knows the number of our hair and the number of our days. It is on the Lord Jesus Christ on whom we should rely on. He is the Almighty and the Faithful!


"Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also." - Matthew 6;19-21


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