No. of Recommendations: 0
Hello Fools,
Forgive my ignorance but if anyone can help me I would greatly appreciate it.
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?
I can't find anything that makes this stuff clear to me. Any help would be appreciated.
Thanks
Print the post Back To Top
No. of Recommendations: 0
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.
No, you don't contribute stock to an IRA, only cash, up to the maximum contribution you're allowed. You buy the stock within that account. All transactions, including dividends, splits, interest, and transaction fees take place within that account in glorious isolation from the "real" world.

Also, how do you use a money market sweep account associated with IRA to accumulate money for stock purchases? Is it considered contribution?
The "sweep" is taken care of automatically by the broker (Actually the broker's computer) who puts any cash lying around in the account into whatever kind of fund (Usually MM) you've chosen from among those offered by the broker. Since this cash was already in the IRA as either contributions or earnings, not as new contributions. Think of the IRA as consisting of the entire brokerage account. As such, it's just like your taxable brokerage account except that any money taken out or put in is subject to the rules for that type of IRA.

I can't find anything that makes this stuff clear to me.
Try this:
http://www.fool.com/Money/AllAboutIRAs/AllAboutIRAs.htm

I've had trouble running down specific information at the Fool, too, till I realized that the key to the labyrinth is in the help link at the right of the tabs on the front page. It has links to FAQs, Archives, Site Index, a Search engine, and a Site Map.

Fox
Print the post Back To Top
No. of Recommendations: 0
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.

Regards..Pixy
Print the post Back To Top
No. of Recommendations: 0
Hello again,
Thank you FoolishLikeaFox and TMFPixy. Now I understand. Sometimes the simplest thing needs explaining. I appreciate your responses.
Print the post Back To Top
Advertisement