Spencer Fry

I never thought much about retirement, but when speaking to my accountant last week he brought up the question of whether or not I had an IRA. “No,” I said. He moved on to other questions, but his question lingered in my mind. After hanging up the phone, I began to do some research on IRAs and found that nearly every free resource on the Web was just trying to sell you an IRA and provided very little information. I came away with more questions than I had answers to.

I knew that I had until April, 15th to sign up for a 2007 IRA and that there were two types — Roth and Traditional — but that was about it. I knew I had some time, so I waited until today to go into Bank of America (my bank) and ask some questions. A friendly, but uninformed Bank of America rep sat down with me, but couldn’t answer any of my questions (and my bank is at the Empire State building, so you’d think the people working there of all places would have answers). Her manager wasn’t any help either.

We ended up calling another Bank of America rep and they proceeded to answer my questions. First, according to this person you are able to have a Roth and a Traditional IRA open at the same time. The person didn’t say this with conviction, however, so I’m a little hesitant to accept that as fact. Second, you are able to change the money in your Traditional IRA into a Roth IRA, but you will have to pay taxes on the money. Third, I can invest up to $4,000 for 2007 and up to $5,000 for 2008, but the lady didn’t know anything beyond 2008. And finally, with a Traditional IRA you can deduct it from taxes, but you pay when you withdraw it at 59 1/2 and with a Roth IRA, you pay taxes now, but not when you withdraw from it.

I didn’t qualify for a Roth IRA, because I made more in 2007 than the maximum you’re allowed to make (something around ~$140,000 is the cutoff), so I was required to sign up for the Traditional IRA. This is good, however, as it’s the preferred IRA for people with large incomes who want to defer taxes until later in life when they’re presumably making less per year. I signed up for a $4,000 Money Market IRA, which I’ll be changing over to a CD on April 16th when I’m allowed to put $5,000 in for 2008. Sadly, the CD rate is terrible at the moment at only 2.75% interest for an 8-month CD through Bank of America.

This was my experience with shopping for IRAs today, and even though I’m late to the game, I really recommend all self-employed people who don’t have the means of signing up for a 401(k) to get themselves an IRA as soon as possible. You can start putting money into an IRA as early as 18 years old and I really wish I had. I don’t want to sound like a stiff, but start planning for your retirement today, because if you’re like me, you don’t want to have to worry about money when you’re 60.