This is getting far too complicated for a young person asking about how to start and what to do with an old IRA. The point should be: *easy, * not every consideration possible.
Why should she sell the contents of an IRA? She can go generic at this point. And if X or Y brokerage charges or complicates, she can do this via her own bank.
Fees are highly relevant. Far more relevant than transfers or rollovers you and I were talking about. If OP is buying a mutual fund with the initial deposit of $2-3,000, it won’t make sense to open an account at Schwab unless they plan to buy Schwab mutual funds. It will cost them $75 on $2-3K. That’s about 3-4%. It’s not a given that you will recover 3-4% in a year. The reason people are recommending Vanguard is, I think, you have very good Vanguard’s own funds that won’t cost anything to buy. In my experience, banks often have higher fees than brokerage firms. That’s something to look into before choosing where to open an IRA account. Do they chage annual/monthly fees, how much do they charge when you trade. Young people are the ones who should pay close attention to fees. Their assets are often smaller than older people’s. Fees can really eat into their holdings.
Sorry, I am going to throw out one more wrinkle just to see if anyone might know:
What happens if I become disabled and unable to work before 60? Should this possibility alter which account type I invest in?
If your adjusted gross income for next year is below $62000, you would be eligible for a tax credit of 10% of you contributions - up to $2000 in contributions. That’s a pretty good return on you investment!
You don’t have to figure out what to do with your old account before you open a new one. Good for you for getting started young. I agree with those recommending Vanguard. Low low costs, great online interface and lots of good information on their website.
I don’t know much about it except a few common sense things to do. Since this could be your last contribution to an IRA for a while, I would max your IRA before funding your spouse’s if you can’t max out both of them. Given the circumstance, maybe regular IRA not Roth is better for you this year. You can convert it next year when you don’t have income and your tax will be lower.
@romanigypsyeyes – without reading carefully, I can’t tell if anyone has pointed out that you need two accounts, one for each of you. Like the others, I’d advocate for the Roth if you don’t desperately need the refund.
https://www.nerdwallet.com/blog/investing/ira-distribution-rules/ Here’s a recent article about types of penalty-free withdrawals.
Other thoughts: Does you spouse have a life insurance policy? (Sorry, I can’t recall if he’s employed now but it seems important for you to have some protection in case you can’t work and something happens to him.)
@romanigypsyeyes If you are in the mood for another internet discussion group where one can get a lot of investing and just general personal finance information, visit bogleheads.org There is the discussion site as well as a wiki for commonly asked questions.
Oh thanks. Someone else suggested that upthread and I completely forgot.
You seem to have gotten more specific suggestions than overviews of IRA and taxes. Below is an overview, the reality is of course much more complicated.
Any IRA is individual, it’s part of the name. It is yours or your DH’s, never joint.
Traditional IRA - you get a tax deduction now on the amount of your contribution, you are penalized if you take any out before you are 59.5 years old. Withdrawals after that time will be taxed as ordinary income. After age 70.5 annual distributions are mandatory. These accounts are tax deferred, not tax free.
Do you know your marginal tax rate? If you are in the 15% marginal tax bracket, a $2000 traditional IRA contribution will get you a $300 tax reduction this year, plus anything you get as a saver’s credit as mentioned above.
Roth IRA - you get no tax deduction at the time of contribution, you can take out your contribution amount (but not the gains) generally after 5 years with no tax consequences. After age 59.5 all funds in these accounts can be taken out with no tax consequences. There is no requirement to take distributions at any age. You can also get the saver’s credit this year for those accounts.
Roth IRAs are generally recommended for people who expect to have higher income in retirement than they have today, so especially for young people starting out. Traditional IRA’s are especially good for mid-career professionals who have higher incomes today than they expect to have in retirement.
An IRA is just a container for your money, it can contain stocks, bonds, cash, mutual funds, or many other types of investments. You have to decide what kind of investment you want.
There are many companies that can be custodians of your IRA. Schwab and Fidelity have physical offices you can visit if you want to deal with humans face to face. Vanguard has only online and phone access. Wells Fargo, Merrill Lynch, UBS, Edward Jones, Raymond James, etc. have physical offices and friendly sales people who will suck up your money in high fees while advising you, even if the current Labor Department fiduciary rules stand. Probably best to avoid them.
There are a lot of good options for retirement savings, and a lot of sharks after your money. It is your responsibility to educate yourself before investing. I second (or third) the recommendations to read up on bogleheads.
^Excellent summary!
I concur with those who recommend Vanguard Targeted Retirement accounts. They diversify your investment by investing in a variety of index funds and as you age will automatically reallocate. They are very inexpensive. I believe less than .25% of your investment per year. That doesn’t seem to be to important when you have a couple thousand in your account but will become more important as your account grows. Many actively managed accounts will have fee of 2% or more. On $100k that $2000 per year vs. $250.
If you are concerned about disability look into long term disability insurance. At your age and assuming you are healthy it should be reasonable. For a young person I deem it more important than life insurance at least until you own a home and have a family. Good luck.
Excellent, MomofJandL.
The thing about tax implications of a trad IRA vs Roth is that, either way, the dollar amount from income is “tax liable,” it’s a question of when you pay that tax. Now or in 35-40 years.
Skip the health uncertainty, for a moment. With a trad IRA, you get to deduct the amount you deposited, from gross income, on the current tax year . As she says, if your tax level is 15%, depositing 2k today saves you $300 in taxes for 2017. But when you take it out, if your income then is much higher, if you are in a higher tax bracket, your tax bite is correspondingly larger.
With a Roth, you deposit “after tax” dollars. You pay taxes on all your income for 2017 (minus whatever ordinary deductions apply,) then take 2k out of your pocket and deposit in a Roth. So you paid that $300 bite on the 2k, but that tax is done, finito, paid.
In general, today, this is why younger folks are steered toward a Roth. Usually, they are in a lower tax bracket than they will be, after 59.5. Pay lower taxes today, rather than possibly higher taxes later. Same basic sorts of investment choices and risks.
And when you set up an IRA, of either type, you get info on the investment types, current returns (growth,) and usually at least a 5-year look-back. You also get some categorical info: high-risk, moderate, and lower risk. Sometimes, it’s easy to just choose moderate risk. If you lose money one year, in general, it should make up, as time goes by.
And, if you have an employer match, for every dollar you contribute, they match a portion.
Thank you all so much. I did start a thread over on bogleheads so thank you so much for that recommendation!
@MomofJandL thank you so much for that detailed and plain-speak explanation. Somehow it didn’t occur to me that our IRAs are ours and not joint. I assume we make each other the beneficiary if something happens to either of us, no?
I make the bulk of our money but we will distribute evenly between our accounts. There will likely eventually be a point where we’re on one income (either me being disabled or him becoming a SAHD).
Unfortunately, healthy I am anything but. I will look into longterm disability insurance though. It’s a good thing to have.
We do have life insurance. Very small policies through my work. I have all of my insurance policies through Farmers so I should look and see if I can add on life insurance there. Mr R will be super easy to get it for- he’s healthy as a horse. For me though? No idea. I was dumb and should’ve gotten it when we opened our house insurance and what not right before I got sick. 
romani…you may find it difficult to get LT disability…but Mr. R definitely should have it. At this point in your young lives, this may be a more important/beneficial investment than Life Insurance for him.
Thank you all so much.
Between here and bogleheads, here is my to-do list:
-Look into LT & life insurance for both of us.
-Open Roth IRAs at Vanguard.
-A semi-unrelated suggestion: look into Ally Bank for savings options (for our more liquid savings).
I feel much more confident about all of this now 