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Investing/Strategies / Retirement Investing
|Subject: Re: A few IRA questions||Date: 9/12/1999 10:15 AM|
|Author: TMFPixy||Number: 13859 of 77550|
Greetings, Madmoon, and welcome. You wrote:
<<I am setting up a Roth IRA. If you are buying stock, I assume you have to keep the purchase below $2000 per year. So after buying the amount of shares that add up to an amount below $2000 you would always be contributing a little less than the full amount. With an index fund you could just send in checks that add up to $2000. Is this the only way with stock purchases?
Also, how do you use a money market sweep account associated with IRA to accumulate money for stock purchases? Is it considered contribution?>>
When you set up your Roth IRA with your broker you will make your annual contribution of $2K. That's all you may contribute in one year. You use that $2K to make all your trades and to pay for the costs of those trades. Typically after you decide what to buy and how much that will cost, you will discover that you have a few dollars to a couple hundred dollars left over. That money remains in the sweep account earning interest until you're ready to trade again or until the following year when you make another $2K contribution. The interest it earns does not count as part of your annual contribution any more than any gain you make in trading stock does. The only thing that counts as such is the money you personally contribute to the account.
BTW, if you can't afford the $2K contribution in one swoop, then most folks either make a monthly deposit and let that build up in the sweep account until they have enough to buy shares. Others will use a mutual fund like an index fund until that builds up to a sufficient size to transfer to the brokerage account. Which you choose to do is up to you.
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