Remember you can own more than 40 different types of assets in an IRA account. You're not limited to holding just traditional securities. Most major brokerage firms managing IRAs offer a selection of mutual funds for you to invest in but restrict your holdings to traditional securities. They are usually not equipped to handle real estate, private equities or others asset classes that the IRS permits. For instance, you can own most any type of real estate including vacation houses, boat slips, and/or commercial. You cannot, however, own any real estate that you care currently benefiting from. For example, you can own a beach house but you or your family cannot use the property during the time it's held within your IRA. But, you can rent it for a profit. Another example...you can purchase a building lot and flip it 30 days later for a profit...all legal within your IRA. You can even invest in cattle within your IRA. Banks will also lend on IRA purchases. So, it's possible to use leverage. You can expect to pay a slightly higher interest rate than if you were borrowing personally but, in some cases such as real estate, the ability to use leverage in your IRA more than justifies the higher rate. Most people are only aware of the traditional mutual fund type of investments. But, if those are doing poorly...well, you've got other choices. To invest in other types of assets, you need to open whats called a "self-directed IRA" with a custodian that allows you to invest in the full range of asset types allowed by the IRS. With a self-directed IRA, you can invest in real estate and privately held businesses, make secured loans (such as a mortgage), make unsecured loans, and also invest in traditional assets such as stocks and mutual funds. With real estate bought by a self-directed IRA, any income and capital gains grow tax-deferred in the case of traditional IRA or tax-free in the case of a Roth. Fees for a "self directed" IRA with a full-service custodian are higher than those charged by custodians offering only traditional securities. There are only 3 assets classes the IRS forbids you to hold within an IRA: Collectibles, Life Insurance, & S Corporations. As usual with the IRS, there are lots of little quirky rules that failure to follow could result in significant penalties so this type of IRA investing is not recommended for people skittish about actively participating in the decision making process. Anyway, you would not have to sell an office building or a herd of cattle just because you changed custodians. The "system" is geared towards funneling the "masses" into traditional securities. OTOH, that's the safest investment for the vast majority of people. /tricia

Hi Surfergal, (Man... with that moniker I wann know where you live, where you surf, I wanna see pics & stories of the last road trip!) Where can I find information on alternatives? What you are specifically asking about falls in the realm of conservative, tax-avoiding and tax-free savings/investment accounts. BEFORE I PROCEED... it is important to state that your overall (personal? family?) portfolio and balance sheet needs to be structured to fit your stage in career earnings (on the rise? On the wane?) your time-to-target ("target" being financial freedom from safe passive income streams,) your risk exposures (health costs, employability, long-term care, asset protection, liability protection, etc.) and your "inflation defensive" investments (almost by definition, managed equities investment accounts.) NOW.... HAVING SAID THAT.... You can get tax-deferred market-like upside, and zero-loss-of-principal guarantees on the downside, with Indexed Annuities. They grow without any "tax bite" on your interest credits, and you finally only pay taxes on the interest (not principal) when you actually withdraw funds. There are a growing assortment of indexed annuities coming on the market specifically designed for the Boomer personality, who has no interest in annuitizing (which gives away control of the principal in return for steady income for the rest of your life,) but still wants guarantes of spendable income. ALTERNATIVELY, you can integrate your insurance coverage with the protective upside benefits of indexed annuities, and GAIN COMPLETE TAX FREE ACCESS to your interest income by using Equity Indexed Universal Life policies. While the two vehicle categories above are "indexed" to the broad stock markets (which means they have interest payments calculated to rise when the markets rise, but never lose principal when the stock markets fall,) they also somewhat lag the stock markets a bit, because the guarantees against downside losses cost the offering companies an insurance cost to protect your money. and how accessable would my funds be? All "safe" vehicles usually have a lock-in period. CDs are generally 100% locked-in, with penalties for early withdrawel. Indexed Annuities and Indexed Universal Life usually have a 'no penalty withdrawal allowance' of a percentage of your total account during their lockin period. and the tax implications on withdrawal? Annuities' interest credits are taxed on withdrawal. Cash-value Insurance interest is taxed IF withdrawn... NOT taxed if you take it as a loan to yourself, from your own account. These tools are not a silver bullet one-size-fits-all solution... but ought to be considered in the overall balancing of your total family portfolio. Cheers, Dave Donhoff Strategic Equity & Mortgage Planner

You will have to pay taxes on whatever amount you convert to the ROTH. The traditional IRA's permit a tax deduction for the amount contributed in a year, with a ROTH the contribution is after tax money. I guess how much you opt to convert would depend on your tax bracket and your ability to pay the taxes on it and how soon after your retirement you plan to begin withdrawing the funds. . I converted the entirety of my IRA money back when you were first permitted to do so. If I remember correctly, I had between 3 and 4 years to pay the taxes on it. I'm glad I did it then. Now the money grows TAX FREE and there is no minimum age at which I must begin withdrawing the money.

I had seen an article on this subject in the WSJ, so I needed to do a search to pull it up again. Here's the pros and cons: WSJournal Investing, November 2, 2008 IRAs May Be Ripe For Shift to Roth One of the simplest ways to take advantage of the continuing market turmoil: Convert your battered investments from a traditional individual retirement account to a Roth IRA. When you convert traditional IRA assets to a Roth, you have to pay the income taxes upfront on the account's value -- and in some cases, those values may be next to nothing at the moment. With a Roth IRA, there are generally no taxes on withdrawals or any future earnings, unlike with traditional IRAs. There's also no mandatory distribution schedule -- again in contrast with traditional IRAs, from which account holders must begin taking minimum distributions by April 1 of the year following the year they turn 70 years old. Plus, you can leave a Roth account intact for your heirs. (Heirs other than your spouse would have to take required withdrawals each year, but they generally wouldn't owe any tax on them.) To be eligible to convert traditional IRA assets to a Roth, your income must be $100,000 or less. So any hit that your paycheck has taken from the economic downturn might help you do a Roth conversion. (Starting in 2010, there is no longer an income limit for Roth conversions.) Neither a required IRA distribution nor the converted amount would count against the $100,000 income limit. If you are 70½ or older, you have to take this year's required distribution before converting any traditional IRA assets to a Roth. Withdrawal Rules Many IRA holders get tangled up in the "five-year" rule when they convert IRA assets to a Roth IRA: You have to hold those assets in a Roth for five years or until you turn 59½, whichever comes first, to make penalty-free withdrawals of converted amounts. Each conversion has its own five-year clock. But if you have already reached age 59½ and you convert traditional IRA assets to a Roth, you can withdraw the actual assets you convert at any time without worrying about a five-year deadline or penalties. It's a different story with any earnings on those assets: Again, you must have held a Roth account for five years to withdraw any earnings tax-free. But you don't need to worry about separating the converted funds from the earnings; that's because the withdrawal rules for Roth IRAs say that any distributions first come from contributions, then from conversions, and finally from earnings, says Ed Slott, an IRA consultant in Rockville Centre, N.Y. Chuck Bauer, a 62-year-old manager in Pittsburgh for Aker Solutions, an engineering and construction company, has a combination of market losses and lower-than-normal income this year. So he is taking the advice of a local financial planner, Bud Kahn, and converting his IRA to a Roth, he says. Mr. Bauer will have to pay about $29,000 in income tax on the conversion, but "we think the account has gone down about $32,000," says Mr. Kahn. "When the account recoups its losses, he will have made up the taxes that he paid. And then that recoupment is never going to be taxed again." Changing Your Mind What if you converted traditional IRA assets to a Roth earlier this year, and those assets have declined in value? In that case, you may want to "recharacterize" the Roth as a traditional IRA. It's a way, says Mr. Slott, to "erase the taxes" on value that has since disappeared. Frank Russo, a 66-year-old Verizon Communications retiree in Port Washington, N.Y., recharacterized IRA investments that he had converted to a Roth after watching their value fall at least 15%. "I don't have to pay tax on an amount that no longer exists," he says. To do a recharacterization,you have to use a "trustee-to-trustee" transfer, also called a direct rollover or direct transfer, to move the contribution from one IRA to another. Don't touch the money yourself, and make sure no checks get made out directly to you or deposited in your bank account. The assets are treated as if they never left the traditional IRA, Mr. Slott says. If you recharacterize your Roth as a traditional IRA by Nov. 30, you could then convert the lower-value assets to a Roth again as soon as Jan. 1, he adds. See IRS Publication 590, at www.irs.gov, for information about traditional and Roth IRAs.