Establish a Traditional IRA account. I believe you can both establish separate IRA accounts, allowing you as a couple to put aside $4K each (if under age 50) or $5K if 50 or over, annually. Any additional amounts you can save should be in separate taxable investment accounts. Any savings are better than none, obviously; so don't let the after-tax issue deter you. Any brokerage can set up automatic monthly deductions from your checking or savings accounts that allow an easy way to contribute without hassle. You'll want the lowest cost brokerage and funds, which means Fidelity, Vanguard, etc. Make sure you can allocate your contributions into at least 2-3 different funds to give you a balanced portfolio. Or, pick a low-cost target date fund, although I don't personally like them. It's difficult to evaluate past performance on them, and many trail the market averages. Good luck to you going forward!

You can also convert a traditional IRA to a Roth, but there are some tricky restrictions to doing this, some of which involve tax rules scheduled to change up to and through 2010. I don't normally like to post an entire article from the WSJournal. But this particular question posed to their ENCORE section (which specifically deals with retirement and financial questions) might be of specific interest to some folks considering Roth conversions. Contribution Methods Sway Roth Withdrawal Rules May 31, 2008; WSJournal Encore section Q: We couldn't contribute to our Roth IRA this year because of the income limits. I noted that we could contribute to a nondeductible IRA and then later convert it to a Roth, assuming we are under the $100,000 income limit or wait until 2010. My question: Since we already have the Roth accounts open, am I right in assuming there is no five-year waiting period to make penalty-free withdrawals? Also, am I right in assuming that you can convert a nondeductible IRA into an existing Roth IRA? --B. from Virginia. The way the five-year waiting period works depends on the way you're putting money into a Roth individual retirement account. There's one set of rules for making penalty-free withdrawals if you are contributing to a Roth IRA, and another set for Roth IRA conversions. Roth IRAs are attractive because they have no withdrawal requirements for the account's owner, along with no tax on future earnings on their assets, unlike traditional IRAs. As you note, there are income limits for making Roth IRA contributions. For 2008, your income must fall below $101,000 for an individual or $159,000 for couples filing jointly. If your income exceeds those limits, though, you may still be able to make a partial contribution (described in Publication 590 at www.irs.gov1). There are no income limits for contributions to a nondeductible, traditional IRA, which you could convert to a Roth later. (One note: If you have pretax money in any IRA, you would owe some income tax on the conversion. Publication 590 explains how to do the math.) This year and next, you can convert a traditional IRA to a Roth if your modified adjusted gross income is no more than $100,000 a year, either for an individual or married couple filing jointly. Modified adjusted gross income is essentially all of your income except for that from any Roth IRA conversions and a few other exceptions. Publication 590 includes a work sheet explaining how to calculate this amount, along with more about what does and doesn't count toward modified adjusted gross income. Starting in 2010, there are no income limits for Roth conversions. And in 2010 only, you can spread the income and accompanying tax from a Roth conversion across 2011 and 2012. Once you've socked away money in a Roth IRA, either through a regular contribution or by converting other IRA assets, when can you take the money out without a penalty? You can withdraw your original contributions at any time with no penalty -- an advantage that a lot of people don't realize. But there is a five-year waiting period for withdrawals of any earnings. The five-year clock for earnings on regular contributions starts the year you open your first Roth IRA, and it doesn't reset each time you make a contribution. You also have to turn 59 years old to avoid a 10% penalty for early withdrawals on any earnings, along with income tax. There's a separate five-year clock for assets you convert to a Roth account from other retirement accounts, says Ed Slott, an IRA consultant in Rockville Centre, N.Y. You have to hold those specific assets in a Roth for five years or until you turn 59½, whichever comes first, to make penalty-free withdrawals. Why the separate five-year waiting period? The federal government wants to make sure Roth conversions aren't used as a penalty-free way to raid traditional IRAs early, Mr. Slott says.

You can create your own Roth 401(k), and, while your contribution is limited to a certain amount, it's still something you cannot get to readily, and there are tax benefits to having one. TIAA-CREF would be a good place to start, since their expenses tend to be lower than that of many other brokerages and mutual-fund families. It also simplifies some of your paperwork, since all your retirement holdings are in the same custodial care. I would strongly suggest, though, that you take a somewhat more active role in your investments. You don't say how old you are (doesn't matter to us, but it has some bearing on how you invest) or what your investment risk tolerance is, or how your current holdings are apportioned, but you should make sure your investments are diversified and appropriate for you at your current stage of life. There are "Dummies" books out there which are a good start, and I suspect there are some useful pages or links on the TIAA-CREF site (I save with Vanguard and they have good info on their site, too, that you can get to even if you're not an investor with them).

Hi glavinsolo, When you buy your home, do you plan to cash in your MFs in order to achieve a down payment? You don't say what kind they are, but with expected rate of return of 8% I assume that they're equity-based. The expense rate of 0.5% makes me wonder about that, though, as few charge that low. If you plan to liquidate within a couple of years, if the markets go down, you may be an unhappy camper when it comes time to reclaim the investment. On the other hand, if you have the certificates issued, you can take them to a financial institution to use them as collateral for a loan ... ... which will work if your growth rate on the investment is greater than the rate you pay on your mortgage, after allowing for income tax cost and deductibility in each case. That way, you convert that investment from being a short-term one into a longer-term one, which reduces your short-term risk. Be aware, though, that a financial institution will be unwilling to loan you more than 50% (or at most 60%) of the value of the asset. But you carry some risk if you draw near the limit of what they'll allow, for if the value of the asset goes down and slips below double the value of the loan, the lender will want either some cash to reduce the amount of the loan, or some other assets to underwrite the support for the loan. And they'll want it today ... tomorrow at the latest. With regard to the cost of homes, I'm not familiar with the U.S. markets in general, let alone the ones in your area. But some calculate that the tough times in the housing markets are far from over. I think that it would be well for you to carry on some study of what house prices are doing in the area where you prefer to buy. If you buy early, and house prices continue to reduce, you'll be an unhappy camper, then, as well. Mortgage lenders get quite unhappy if the valuation of the house comes rather close to the amount of the mortgage still owing. If the value goes too low, they'll require that you sell it ... at a loss, of course ... ... or they may choose to foreclose, in which case there'd almost surely be more costs if they sell it than if you do. Which could well mean that they'd be notifying you that you owed them the difference between what you owed on the mortgage, plus costs of repossession and sale, less the amount that they sold it for. Not a pleasant scenario. But one that many who accepted those low-rate mortgages a few years ago will be facing. My feeling is that if I wanted to buy a home in the U.S. these days, I'd be keeping my money in my genes (sorry, "jeans") for a while. There are those who claim that I have some frugal chromosomes in my genes, as a matter of fact. As a matter of fact, my daughter is considering buying accomodation in Arizona, these days. Good wishes as you make your plans. ole joyful