Your Money_ The Missing Manual - J. D. Roth [146]
You can withdraw your contributions at any time without penalty. But if you try to withdraw your earnings (the returns on your contributions) before you're 59 and a half, you'll have to pay taxes and a 10% early-withdrawal penalty (except in special circumstances).
Lastly—and this is important for many people—you can withdraw up to $10,000 in earnings without penalty to buy your first home, as long as your IRA spans at least 5 tax years. Check out http://tinyurl.com/mf-irahome for more info.
There are other arcane guidelines and provisions, but these are the basics. If you want more info, check out Publication 590 at the IRS website (http://tinyurl.com/IRS-iras) or contact your friendly neighborhood financial planner (see the box on the next page).
On The Money: How to Hire a Financial Planner
If you don't have the time or knowledge to create a roadmap for your financial future, consider calling in a pro. A financial planner can help you put the pieces of your investment puzzle together in a way that makes sense for your personal goals and values. Even if you do most of the work yourself, you may want to have a planner check things over to make sure your investment plan will work as you intend. Planners can also make recommendations and give advice on how to implement your plan.
Before hiring a planner, decide how much help you want or need. Different planners charge different rates, typically based on one of these methods: by the hour (best if you need minimal help), by the project (best if you need help in a specific area), on retainer (best if you want ongoing help), or based on a percentage of the assets they're managing for you. (Watch out: This last method has a built-in conflict of interest.)
The more research you do on your own (like reading this book!) and the more you're willing to do yourself, the less you'll end up paying. Most planners will give a free initial consultation, which will let the two of you get a feel for each other. (Be sure to ask these 10 questions: http://tinyurl.com/CFP-questions.)
As you look for a planner, watch out for potential conflicts of interest. Ask yourself if the recommendations she gives you could somehow benefit her. Those paid by commission tend to be salespeople rather than actual planners. So ask questions, read the fine print, and assume nothing.
It's important to know that the term "financial planner" isn't regulated—anyone can call themselves that. But Certified Financial Planners (often simply called CFPs) are regulated and have to agree to uphold a set of standards and follow a code of ethics.
You can find a CFP using the Financial Planning Association's PlannerSearch website (http://tinyurl.com/FPA-search). The Garrett Planning Network (www.garrettplanningnetwork.com) has a searchable directory of financial planners who charge by the hour. The National Association of Personal Financial Advisors (www.napfa.org) also has a searchable directory.
For a financial planner to give investment advice, she has to be a registered investment adviser (RIA). RIAs are required to place your interests above their own; stockbrokers—even if they're CFPs—don't have to do that.
How to open a Roth IRA account
Opening a Roth IRA account is easy. If you've ever filled out a job application, applied for a credit card, or opened a bank account, you've got what it takes to open a Roth IRA account.
Deciding where to open your Roth IRA account is the toughest part of the process. If you already have an investment advisor, ask her for recommendations, but look for other options, too. Many banks and credit unions offer IRA accounts (though you'll usually be able to invest only in deposit accounts, like CDs). If you're willing to make some decisions on your own, you can open an IRA account through a discount broker or mutual fund company. There are a lot of good options out there, but you might start your search with these firms:
Fidelity Investments. http://tinyurl.com/FID-ind,