IRA, a wise choice in economy depression?

Question

my IRA has not been doing so well. Should I do my own investment or should I still contribute to IRA? I hate to see my IRA losing money?

Answer 1

Hi Tofu,

If your IRA isn't making money, then you need to change what you've invested in, but you definitely don't need to pull money out or stop contributing. The beauty of IRAs and Roth IRAs is that, as long as you've invested in stocks, bonds or funds that increase in value, you will not be taxed. That's a VERY good deal, so don't be hasty pulling your tax-protected money out of these special accounts. Check out http://www.money-and-investing.com/Roth-... before you decide, it's a nice introductory guide to tax free investing (IRAs, Roth IRAs & 401ks).

It also sounded like the securities you are buying are riskier than you are comfortable with. If capital preservation (protecting your nest egg) is your main concern, you should probably move some money into bonds, blue chips or conservative ETFs. A good place to go to learn about various investing strategies is http://www.money-and-investing.com/Stock...

Best of luck to you, Tofu! Post back here often so we can watch your progress. It's fun to watch beginning investors on their wealth-building journey.

Cheers,

Odd Lot

Answer 2

Your IRA should be a long-term investment.  Therefore, don't let the markets ups and downs affect the way you invest.  We are not in a recession or a depression.  Look at it this way, the market is on sale right now.  The money you invest will stretch farther which will give you greater potential for growth in the long run.  

Answer 3

Few basics.

1. An IRA account is not an investment. An IRA is nothing more than a vehicle to defer taxes.

http://en.wikipedia.org/wiki/Individual_...

Depending on your age, and income, I would be only contributing to a ROTH IRA.

Sure you get (maybe) a little tax break on Standard IRAs but you'll pay dearly in income taxes when you take money out in the future. How do I know this?

Social Security is scheduled for bankruptcy. The way to avoid this is for gov to cut spending or to raise taxes. Which do you think gov will eventually do?

Correct.

That is why you want to have a Roth Ira. No tax deductions now, but 100% tax free withdraws later.

http://en.wikipedia.org/wiki/Roth_IRA

What you want to do is start maxing out the Roth. Reevaluate your investments in the IRA. I don’t mean sell, I don't know what you are invested in but I know it is not oil or any commodities. I don’t know your overall picture is so I can’t give you personalized advice.

Depending on your age and time to retirement, you might want to consider Dollar Cost Averaging in the S&P 500 Index, and Mid-cap 400 Index and the Russell 2000 Small Cap Index.

Dollar Cost Average

http://en.wikipedia.org/wiki/Dollar_cost...

S&P 500 Index

http://en.wikipedia.org/wiki/S&P_500

Mid-cap 400 Index

http://finance.google.com/finance?q=NYSE...

Russell 2000 Small Cap Index.

http://www.russell.com/Indexes/character...

Here you will have the 500 largest companies in America; the 400 largest mid-sized companies, and a portfolio of the 2000 largest small companies. I know it sounds like an oxymoron.

You should be looking at a 10 year time frame for these indexes. Some say 5 years, but in my 19 years in the markets I tell people to look at 10-15 years for an investment time frame and dollar cost average every month into these indexes.

For more help, seek a professional advisor in your area with 10+ years market and retirement experience.

Answer 4

first of all we are not even in a recession. Just keep contributing as the market always makes money over the long haul

Answer 5

You are not alone. Nobody likes to see their IRAs losing money. But when you invest in risky assets like the stock market, losing money once in a while is part of the deal.

As long as you keep adding money to your investments you will probably be ok in the long run. (There are no guarantees but the odds are pretty good.) When prices are lower, you get to buy more stock with the same amount of money. Putting the same amount of dollars into an investment at regular intervals is called dollar-cost averaging. It allows you to have (temporary) declines work in your favor.

This applies to any type of investing, whether you make your own investments, whether you put the money into an IRA or 401(k), or whether you are buying bonds or stocks.