IRA stuff, part two

[annathepiper]

To everyone who answered my question about IRAs, thanks! It was in fact a Traditional IRA that I had before, so our accountant said that I should do the same kind of IRA now. And the idea was also to just stick it into something in my name and transfer it into something better later as the opportunity arose.

So it sounds like I should not worry about actually trying to buy anything with the IRA funds yet? This would make this form the bank gave me easier, probably, since sections 6 and 7 talk about purchasing mutual funds and I don't think I want to do that. However, section 3 on the form talks about "FDIC Insured Investment Options", and there seem to be options for "Market Rate Retirement" and "Fixed Rate Retirement CD" there. I am given to understand that CDs are fairly conversative and possibly a good idea; would anyone have any useful commentary in this area?

Comments

[firni.livejournal.com]

PAGING wrog, PLEASE REPORT TO THREAD 176338, STAT

[wrog]

HI BETH!

[smeehrrr.livejournal.com]

Honestly I'd say go risky with the stuff in your IRA, you can't touch it for 30 years anyway.

[firni.livejournal.com]

Preston's mom freaked out when her IRA started losing money (thanks to the economy), so she took it all out and spent it.

MAN, SHE'S SMART

[cafiorello.livejournal.com]

A CD is a fine, conservative place to park it for now. I go a lot riskier since I've got 25 or 30 years 'til retirement, but for now it should be fine. Especially if wrog is right about another bubble burst here in a little bit! ;) But...if you want to move it out of the CD later, pay attention to the dates, because there are only certain times you can redeem it. So if you get a one-year CD now, you'll have to decide in about a year what to do with it.
Cathy

just to get this out of my Emacs buffer before I reboot

[wrog]

So it sounds like I should not worry about actually trying to buy anything with the IRA funds yet?

Yes.

This would make this form the bank gave me easier, probably, since sections 6 and 7 talk about purchasing mutual funds and I don't think I want to do that.

Even if you don't think you want to, fill it out anyway. Mutual funds are useful for some things, especially for diversification and pursing strategies that you don't have the time or the resources to pursue yourself; (i.e., you let the fund manager do the work; he has more money to play with and so he can do stuff that you can't; granted, you're paying him a salary somewhere along the way, but that's life). And there are all kinds of mutual funds out there.

However, section 3 on the form talks about "FDIC Insured Investment Options", and there seem to be options for "Market Rate Retirement" and "Fixed Rate Retirement CD" there. I am given to understand that CDs are fairly conversative and possibly a good idea; would anyone have any useful commentary in this area?

CDs are normally a reasonable option, but they lock up your money (it's not like bonds where you can sell them in the secondary market if you really want to get your money out), so unless you know you're not going to want to do anything else for the term of the CD, or unless it's paying really good interest (which most of them aren't at the moment), you probably want to stick with moneymarket for now. Problem is, interest rates are generally being held suckfully low (in order to entice people to spend their money on overvalued stocks instead). If you do get CDs you want to keep the term fairly short because rates will be going up again.

The main problem right now is the powers that be are between a rock and a hard place. If they raise interest rates, they destroy the housing market and a whole mess of overextended consumers who've just lost their jobs. If they continue to keep interest rates down, the dollar continues to slide into the toilet, and foreign investors say, "Why the hell are we keeping our money in dollars?" One could argue that They might hit things it JUST RIGHT, have the dollar slide fast enough to keep stock prices propped up, but slow enough not to scare the foreigners and to not set off monster inflation, but it's something of a balancing act and they'll almost certainly get it wrong. And since the political consequences of erring on the side of deflation are dire, they'll err on the side of inflation (i.e., send the dollar down too fast).

Things that I believe are going to win in this environment

1. Precious metals and associated mining stocks
2. Foreign currency and foreign denominated bonds, especially from countries like Australia and Canada that are politically stable and have a large chunk of their economy being natural-resource based.

And there are mutual funds that do this stuff. Prudent Bear's income fund PSAFX (not the short fund BEARX unless you're feeling adventurous) does a combination of foreign government bonds and gold stocks (bond funds normally suck, but international stuff is hard to do directly and is probably going to be enough of a win to be worth it). For straight gold stock funds there's Van Eck International Gold Fund (INIVX) and American Century Global Gold (BGEIX). Admittedly I don't own any of these myself; on the other hand Van Eck's portfolio looks very much like a scaled up version of mine, so...

Re: just to get this out of my Emacs buffer before I reboot

[annathepiper]

I wish you would have told me all this before I turned in the form yesterday at the bank. ;)

I went with a 1-year CD. But I'll keep the rest of this stuff in mind when that CD runs out. Thanks, Roger!

Re: just to get this out of my Emacs buffer before I reboot

[wrog]

Oops. Oh, well. Blame Beth :)

At least you'll still have your money when the year is up.

And nothing prevents you from going in tomorrow or whenever and saying, "Oh I changed my mind, I wanna enable the mutual fund stuff" and asking them for the form again. But no rush, I guess...

Re: just to get this out of my Emacs buffer before I reboot

[annathepiper]

*nodnods* I'm not terribly in a hurry at this point. Though I will have to educate myself as to whether I can do something like throw other money into the CD while it's sitting there. I don't know even that kind of basic data about it.

Thanks for all your help!

[annathepiper]

*nodnods* Can I put money into it during that year? (See commentary to Roger re: me not even having that basic clue about what I'm doing here.)

[annathepiper]

Well done!

Re: just to get this out of my Emacs buffer before I reboot

[firni.livejournal.com]

That one didn't require a lunch, it required a banquet.

[annathepiper]

Enh, it's a teeny tiny mini IRA. If I get too risky with it, I'll blow the whole shebang! :) (I suppose this is where the 'figure out how to contribute money into it' thing comes in.)

[cafiorello.livejournal.com]

Gads, I've never actually done the CD thing myself. But my understanding is this: You can add money to the IRA you've opened, but you'd have to buy another CD if you add because those are dated. However...check with your bankie people, because what you might be able to do is add money to the IRA this year by doing your mutual fund research when you have time, then at the end of the year term on your CD, roll that money into the mutual fund you have then. And right now, you can put money in an IRA for the 2003 tax year (as long as you do it before April 15th) and you'll still be able to put money in for 2004 anytime this year. In case you're looking to put a lot away.

And I spent several years doing tons of research and stuff and finally decided to put my money in low cost index funds 'cause I've got better things to do with my time now. YMMV.
Cathy

[annathepiper]

Well, Dara and I have already filed our taxes and gotten our return back, so filing for this year would be kind of silly at this point. :)

But! Thanks for the pointers on the rest!

[cafiorello.livejournal.com]

Well, if you had a substantial chunk of money to invest, and were eligible to put it into an IRA based on income limits, and investing it in an IRA for 2003 lowered your taxable income enough to lower your tax due, you could file an amended return and get the rest of the refund. If it were enough to bother with that much of a PITA, that is.
Cathy

[annathepiper]

*nodnods* This situation does not, in fact, apply. ;) I was advised by the person I spoke with at Bank of America's retirement funds number to not bother with amending the return, anyway.