retirement

When's the best time to open a Roth IRA?

Don TaylorDear Retirement Adviser,
I'm concerned about the need to save for my retirement. Can I fund a Roth individual retirement account at a time of my own convenience? What fees are involved? It is possible for me to make a one-time contribution and let the account grow?

Thank you,
-- Bill Bonus

Dear Bill,
Providing you qualify to fund a Roth individual retirement account, you may certainly open it at your convenience. You must have taxable compensation, but not so much that your modified adjusted gross income is too high to qualify to fund the account directly.

Taxpayers with too much income to fund a Roth IRA can make after-tax contributions to a traditional IRA and then convert it to a Roth IRA. It can be complicated, however, so I'd suggest that you work with your tax professional if you decide to go the conversion route.

Your question appears to focus on timing and fees. These are areas that are easier to define. You can contribute at any time during the tax year through the tax filing deadline. For the 2013 tax year that's between Jan. 1, 2013, and April 15, 2014. The sooner you put your money to work, the longer the opportunities are to earn investment returns.

On the subject of expenses, watch for possible annual account fees, a sales load on any mutual fund purchases, 12b-1 distribution or marketing fees on the mutual fund investments and any commissions paid on the investments.

You have two major decisions: where the account will be held and how it will be invested. For the location, the basic choices include bank accounts, brokerage accounts, or accounts with a mutual fund company.

On the investments, basic choices include stocks, bonds, cash, mutual funds or exchange-traded funds invested in stocks, bonds or cash. You'll want to look at account fees, annual expense ratios, your own personal risk tolerance and investment goals when deciding how to invest.

You can make a one-time investment up to the contribution limit for that tax year. Since you're saving for retirement, you'll want to follow up with additional contributions, unless you have a particularly large amount of cash to invest initially.

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