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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 27546  
Subject: Re: How to start?? Date: 12/5/2012 10:23 PM
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If the funds in the IRA are all rollover funds from a 401K plan, the funds can be transferred to your present employer's 401k plan. The rules of your plan dictate how this is done. It might be ok if you have a low cost 401k plan with good investment choices. But the investment income is still taxable at ordinary income tax rates in retirement. (Note that rollovers and transfers do not count as contributions. You can still make the full maximum contribution to your 401K and Roth in the same year regardless of any transfers.)

Roth conversion is attractive assuming your income tax rate is still fairly low. Plus you can pick your own custodian and your own investments. And it is possible to put the Roth at a discount broker and invest in stocks. Most people do not move rollovers to 401k's because IRA or Roth IRA gives you control of your funds, whereas your employer can change rules or investments in your 401k at any time.

As to when to invest in index funds, timing an investment is always difficult. That is an advantage of making regular investments in the same fund. Dollar cost averaging gets some shares at the lowest available price and you buy more shares at the lowest price.

No one does market timing well. We hope that Congress resolves the fiscal cliff problems. Then economic recovery should continue. That makes it a good time to invest. But clearly these are times of uncertainty. In a 401K plan where you make the same contribution every month, this does not matter so much. But it is a concern if you plan to make a large single purchase.

On emergency funds, think about the largest event that might come up. Suppose your car required a major repair costing say $1000. How would you fund that? With assets of $35K, you can probably come up with the funds in time. Personally I would put it on a credit card and then work out where best to get the funds when the bill comes in. A bond fund usually works well for that, but if you have a portfolio of stocks, in a month you can decide which one to sell. You do take the risk that you might be forced to sell at a loss or at unfavorable times. But the alternative is often lower rates of return. So that is one choice you have to make. You also must decide for yourself how large your emergency fund needs to be. Some do keep funds in money markets for that purpose. An interest bearing checking account can also be used.

As to discount brokers, there are many of them. They are discussed on the Discount Broker discussion board--

http://boards.fool.com/kiplingers-broker-ratings-30321628.as...

They are most up to date on the various brokers. Personally I use Fidelity. They claim to be the largest. They do a good job. They have an office in most major cities for face to face discussion when necessary. They also offer training courses on various investment subjects. And they provide free independent research.

All of the discount brokers I know of seem to do a good job. So pick the one that meets your needs at the best prices.
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