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Hello everyone! I have made the maximum $2,000 contribution to my Roth for the last four years. In addition, my employers have been taking money out of my monthly paychecks and putting it into two "teacher" retirement programs: APPLE and PARS. Here is my question: now that I am leaving both retirement programs, I have approximately $2,800 to rollover, re-invest, etc.--what are my options regarding the Roth? Can I roll the $2,800 over to my Roth? Can I use $2,000 of the $2,800 for next year's contribution? Can I simply ask the people at APPLE and PARS to send the money, untouched by me, to my brokerage house for some sort of tax-sheltered investment? My assumption, by the way, is that most would consider it ludicrous to "cash in" the $2,800 and pay 20% to the military budget, or wherever it might go.

Please help me.
In cahoots,
commaman
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Greetings, Commaman, and welcome. You wrote:

<<Hello everyone! I have made the maximum $2,000 contribution to my Roth for the last four years. In addition, my employers have been taking money out of my monthly paychecks and putting it into two "teacher" retirement programs: APPLE and PARS. Here is my question: now that I am leaving both retirement programs, I have approximately $2,800 to rollover, re-invest, etc.--what are my options regarding the Roth? Can I roll the $2,800 over to my Roth? Can I use $2,000 of the $2,800 for next year's contribution? Can I simply ask the people at APPLE and PARS to send the money, untouched by me, to my brokerage house for some sort of tax-sheltered investment? My assumption, by the way, is that most would consider it ludicrous to "cash in" the $2,800 and pay 20% to the military budget, or wherever it might go.>>

When you leave that job, then you should be able to transfer your retirement plan monies to a traditional IRA. You cannot transfer it directly to a Roth IRA. Once in the traditional IRA, though, you may then further transfer it to a Roth IRA. On that transfer, you will owe regular income taxes, but no early withdrawal penalty, on all previously untaxed deposits and earnings. Your transfer to either the traditional or Roth IRA does not count against is not considered part of your allowable $2K annual contribution limit to an IRA. Definitely arrange for a direct transfer of the proceeds from your plans to the traditional IRA and from the traditional IRA to the Roth IRA. Both your plan administrators and your IRA custodians know how to do this and will guide you through the process. By arranging for direct transfers, you will avoid any and all income tax hassles.

Regards..Pixy
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The plan administrator of your APPLES and PARS programs should be able to tell you what your options are. If they are "qualified" plans, it should be possible to transfer them to a rollover IRA account and then convert that to a Roth if you like. They could go to the Roth IRA you already have or you could establish a new one. (Your APPLES and PAR could turn out to be annuities, in which case the options will be different.)

If they are qualified, then the best way to transfer is to contact the brokerage you have selected to receive the funds and ask them to set up a transfer. There are usually just a few forms to fill out and you are done.
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One quick question:

I have made the maximum $2,000 contribution to my Roth for the last four years.

This is not possible (at least directly). The Roth IRA has only been available in years 1998 and 1999, thus you could have only contributed $4000 to a Roth IRA, and for tax years 1996 and 1997 contributed to a Traditional and then converted the monies to your Roth.

Is my speculation true or are you contributing to a Traditional IRA?

jbw
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Zorloc writes:

<<This is not possible (at least directly). The Roth IRA has only been available in years 1998 and 1999, thus you could have only contributed $4000 to a Roth IRA, and for tax years 1996 and 1997 contributed to a Traditional and then converted the monies to your Roth.>>

Good eye! I missed that in my reading of the original query.

Regards..Pixy
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Dear Zarloc and Pixy,

Thank you for the response. Yes, what I failed to mention was that in '96 and '97, I contributed a total of $4,000 to a traditional IRA. In '98, I took that money and put it in a Roth. All of the other info, however, in my original message is, I believe, accurate.

Based on this new information, what can I do with the money in APPLE and PARS?

Thanks,
commaman
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Pauleckler, thank you for your response.

On my way to breathing easier,
commaman
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Commaman sez:

<<Based on this new information, what can I do with the money in APPLE and PARS?>>

It still doesn't change what I said before. As Pauleckler pointed out, as long as the plans are qualified you may transfer them to a traditional IRA. Once there, you may futher transfer the money to a Roth. Whether the latter makes sense or not is another issue. For some ideas on what you need to analyze before you take that step, see my post on conversions to Roth IRAs at http://boards.fool.com/Message.asp?id=1040013000441002&sort=postdate. IMHO it's appropriate in just a limited number of cases.

Regards..Pixy

Regards..Pixy
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