Serious question:What should I do with my IRAs? I got out of the stock market entirely last summer,

[BamaRefugee]

had to do it when I couldn't sleep well at night wondering when tRump would fuck it up. I already lived through losing 42% of my hard earned savings under George Bush and I was NOT doing that again. Put everything into money market funds with my IRA companies/brokers/ whatever they're called.
So..I'm 68. I planned on waiting a while to cash them in. But now, here's the big question: IF I DON'T CASH THEM OUT NOW, how do I know those companies will even still be in business if I wait to do it? And where my money will be?

Is it safe to leave my money in those IRAs???? I haven't asked those companies, because I know I'm absolutely gonna get fed an answer that benefits them far more than me.

If anybody has any expertise in this area, please share your thoughts on the subject. Although I don't even know how safe the money would be if I put it in the bank now either.

Thanks in advance for any help.


p.s. I've lived beneath my means for my whole life, because I wanted to feel "safe" when I got old I certainly didn't intend to spend my "golden years" like this! i still work, 7 days a week, just because I know that once my savings start getting spent, they're never getting replenished, and I'm trying to put that off for as long as I can.

p.p.s. Well, I DID work 7 days a week, as an independent contractor...now I may just be an unemployed guy who cannot get unemployment benefits at all.

[lapfog_1]

1. risk adverse... money market.

some risk - tax free muni bonds

more risk - gold and other metals, perhaps real estate

insane risk - buy back in to the stock market.

Idiot risk - concentrate on airline and cruise ship stocks.

[dawg day]

3. Don't go tax-free

IRAs can't be in tax-frees, I don't think, as they're already tax-advantaged.

I have corporate bond funds for half of mine. Safe but little growth.

[lapfog_1]

4. ahh right.. I don't have an IRA... so you are probably right.

[A HERETIC I AM]

13. It's not that they can't be, it's that there is no point....

or advantage to owning Municipal Bonds inside a tax qualified account.

[dawg day]

2. Last year I put half my IRA into bonds

That account hasn't grown much, but it also hasn't lost any.

[exboyfil]

5. You got an answer let me know

I am all money market and TIPS after hitting the door early on this crash. Kicking the tires on TIPS (miserable rates when compared to when I bought them last time), Gold, and of course eventually reentry into equities (or not). If it was 2008 all over again, I would put the whole thing in TIPS (Inflation + 3%) and have fewer worries going forward. It is hard to stomach Inflation + 0.5%. They did have a jump up a couple of days ago.

[progree]

6. FDIC-insured CD's? (Certificates of Deposit). I have an IRA with some of those.

(or NCUA-insured if you get them through a credit union).

[wishstar]

7. Safest right now is savings accounts/CD's with FDIC /NCUA insurance protecting your money

But you have to carefully follow proper procedures for IRA transfers/rollovers from current institution to a new institution to retain the tax advantages of an IRA.

But if you are with highly rated reputable brokerages your money should be safe but you should research your companies and if they aren't top notch major brokerages you can at least shift some of your savings to a 5 star rated FDIC insured bank or major insured credit unions.

I have been told by banks I use that keeping large amount of funds parked in checking accounts, even with 5 star banks, is unwise because hackers can more easily transfer out checking acccount funds whereas money in savings accounts and CD's is less vulnerable to cyber thieves.

[BamaRefugee]

8. Yep, that happened to me, the bank made good but advised me to put discretionary funds into CDs, not

Checking or savings. Safer. I have some of those.

No I’m not rich! Just a life long penny pincher!

[ooky]

9. My Vanguard stable asset fund is still holding up.

It didn't lose any value during the 2008 selloff and its the only fund in our plan that isn't losing value now. Still actually earning ~ 2%. I parked all my 401k there back in 2018 so I didn't participate in this last run up but haven't lost money either.

[Blue_true]

14. Vanguard is really good. I wish the Founder was still alive, but he seems to have

built a solid chain of command.

[ProfessorGAC]

10. Look Into Guaranteed Income Annuities

They're called "zero is a hero" instrument for a reason. The payout is a lower % because the company is taking the investment risk, but the book value to the holder can't go down.
There are issues with legacy $ because there is a declining surrender penalty for several years (should you not outlive the plan term) and the forfeiting of big market gains can diminish money bequeathed.
We've got over a million & a half in those and if that leaves less when we're gone, that's just a trade on surviving things like are happening now.

[Bengus81]

11. Call Shifty's of El Segundo...he'll fix you up with a great "investment" plan

[Blue_true]

12. What company do you have the IRAs with.

That makes a difference. The biggest like Fidelity, Vanguard, Nuveen, ect, won't have an issue securing your money. The very small ones may have an issue.

I have never done an IRA, what is federal insurance on them like?

Smart move following your gut and getting into cash last Summer. The market mostly churned after that and you would have needed to be highly connected to have been able to grow your assets in that situation.

If you IRA is in cash with a big Fund company, just leave it there and go on with your life. With interest rates headed to negative territory under the orange jackass, you may lose a wee bit, but not enough to hurt you. Since you are close to 70, just hang on, I think President Biden will be getting the ship right when you turn 70 and are eligible for no holds barred withdrawal levels on retirement funds.

To me, it seems your biggest worry at this point should be how to withdraw your money once you reach 70. If you are healthy, you could eventually live up to 30+ more years after you turn 70, how will you plan for not being an very old person that relies on family or government for basic money?

[BamaRefugee]

17. My only available plan is just to keep working as long as I can and put off the time when I will

actually have to live off the saved money. That will last for a while, but if I stay alive, I'll eventually have to decide whether to become a shopping cart street person, or a rail riding hobo. Seriously.

[Blue_true]

34. I hope that by the time you get to the point where your funds are exhausted,

we have a situation where people that are doing well financially share with the rest of society.

[llmart]

25. The new rules for IRA's...

state that you do not have to take required minimum distributions until the year you turn 72, not 70.

[RichardRay]

15. Critical questions

Age?
Time to earliest planned retirement?
Time to latest acceptable retirement?
Health?

Without that information most advice is noise.

[BamaRefugee]

16. well it says in my post I'm 68 and plan to keep working as long as I can

I'm diabetic but I have reversed it according to my endocrinologist, all my numbers are that of a normal person now. I had a total hip replacement last Christmas and it works perfectly.

My main question was whether the IRA brokerages can actually stay in business, and if something happened to them, how the heck would I get my money?

[HeartachesNhangovers]

18. I believe that mutual fund companies are generally safe ...

Even though they aren't regulated as tightly as banks, they are still highly regulated. These companies are in the business of investing customer money and taking a cut of that money in the form of expenses. They get their cut regardless of how badly or how well the underlying investments do. If you read your prospectus for whatever fund or account you have, you will find that if customers panic and all want their money at once, the company can suspend or delay payouts to prevent getting into a liquidity problem.

[MoonlitKnight]

19. And they have insurance from FINRA

Not at all as safe as FDIC but there is that extra layer. The Fed is stepping in to shore up money markets as well. And the actual fund companies won’t break the buck or it will kill their company.

If anyone is wondering about when to get back into the stock market, you can’t time the bottom. Dollar cost average back in. That means regular investment that will lower risk by spreading out the prices.

[A HERETIC I AM]

20. The Financial Industry Regulatory Authority (FINRA) does NOT underwrite Mutual Fund companies....

and does not insure mutual funds in any way. Finra has a role in regulating insurance companies and provides rulemaking, but it is not an insurance company or organization.

Perhaps you were thinking of the Securities Investor Protection Corporation (SIPC) which insures brokerages and fund companies.

https://www.sipc.org/for-investors/what-sipc-protects

Here is an article which further explains what the SIPC covers;


SIPC Insurance: What It Does and Does Not Protect

[MoonlitKnight]

21. Correct

Thanks for the correction. Got my acronyms mixed up.

[A HERETIC I AM]

23. No worries.....

Just don't sneeze on my posts.


And wash your hands before dinner!

[A HERETIC I AM]

22. First, keep in mind that your IRA's are simply accounts, just like a checking account is an ACCOUNT

And who you open that account with is a matter of personal preference. If you trust your regular bank more than you trust the firm with which you have your IRA's, and if that bank offers IRA services (Most banks do), then there is nothing stopping you from moving your money from one firm to another. At the very most there will be a small fee to close the accounts and/or open the new ones.

You said;

So..I'm 68. I planned on waiting a while to cash them in.

Good. You don't want to "Cash them in" because by moving out of any stocks or Mutual Funds you may have held and into Money Market Funds, you have already done that. Plus, if you take a lump sum distribution from a traditional IRA and it is a significant amount, it will seriously affect your tax situation. All funds distributed from a Traditional IRA are taxed as ordinary income. Same with a 401(K).

But now, here's the big question: IF I DON'T CASH THEM OUT NOW, how do I know those companies will even still be in business if I wait to do it? And where my money will be?

Nothing lasts forever, but the companies that you have opened these accounts with are considered "Custodians" and operate under specific rules under the IRS guidelines. Many, many brokerage firms have gone out of business over the years, but the people who had accounts with them didn't lose any money. More often than not, the actual assets under management transfer to another custodial firm. A good example of this is a company I used to work for - AG Edwards and Sons. Back in 2008 Edwards was bought by Wachovia who shortly thereafter went bankrupt and they were acquired by Wells Fargo.

Keep in mind this was during the major selloff of 2008, but not one single person who had an account at Edwards lost one single red cent as a result of those acquisitions. Not one.

Is it safe to leave my money in those IRAs???? I haven't asked those companies, because I know I'm absolutely gonna get fed an answer that benefits them far more than me.

Well, who are the firms? Is there more than one? Or are you using the plural out of convenience? But the real answer is what I said above. You don't have anything to worry about. UNLESS your entire portfolio inside those IRA's is tied up in those companies stock. In other words, If you had an IRA at Wachovia and inside that account you held Wachovia stock and nothing else, then yeah, you were probably going to lose your shirt. Otherwise, don't worry.

If anybody has any expertise in this area, please share your thoughts on the subject. Although I don't even know how safe the money would be if I put it in the bank now either.

I would like to kindly invite you to check out the "Personal Finance and Investing Group. It is frequented by many folks who have expertise in this area. I happen to be the host. Please feel free to visit the group and ask your investment questions there. You will receive honest, straightforward, and above all, ACCURATE answers to your questions.

[BamaRefugee]

24. Thank you, GREAT answers.

[A HERETIC I AM]

32. My pleasure.

Don't panic or freak out, stay calm and best of luck.

May all your trades be net gains

AHIA

[empedocles]

28. To Bama. [Good answers Heretic]. I use Vanguard and American Century for my

retirement accounts. I invest in T-bills. With a mutual fund company, I own the shares in my name, Am Cent manages the T-bill account. As Heretic pointed out, the mgr can go bankrupt but the shareholders still come out ok. T-bills are the safest, imo, for Capital
Preservation [which is the name of the AmCent fund I am in]. T-bills are guaranteed by the full faith and credit of the US Gov, not some insurance co, etc Those T-bills effectively greatly needed to finance the Gov, so its the last thing the Gov will limit, default on.

If inflation hits, T-bills will keep pace, as they did around 1980 when they yielded around 22% at a peak. If stocks keep going down, at some point you may switch some money into blue chip stocks for some rebound gains, as I will do. [That could be a surprisingly long wait].

Caution - investment advice abounds. Best to educate yourself [historically as well as the various options], as well as possible, and pick accordingly.

[gibraltar72]

26. I can't give advice anymore

However I would park in real good money market or very secure Muni if there is such a thing.

[CountAllVotes]

27. Mine has been in CDs for years

I'm up abt. 12% since dump took office.

I know it is not a lot but it is tied up for the next 4 years at 3.4%.

I've had different rates ranging from a low of 2.76% to a high of 7%.

It was in the stock market for awhile. I made some money on it and it began to go down and and I got out and it has been in CDs ever sense.

I may not make a lot but I never lose, never.

Its difficult to find a good rate right now but check around for an insured account.

Best of luck.

[tandem5]

29. It depends on what you can do within your IRA.

Last edited Thu Mar 19, 2020, 08:47 PM - Edit history (1)

An IRA is just a tax shelter that envelopes many different types of accounts that have their own inherent risks and insurances. If we are just talking risk in terms of institutional failure and not investment losses then it broadly breaks down like this: If you have a standard bank IRA then the accounts within the IRA are things like CDs, money market, and interest savings. Each account is held in your name and each are FDIC insured. A bank IRA is different from a brokerage IRA offered by an investment institution (which can include the banking institutions). You can buy virtually any stock, bond, ETF, or mutual fund as well as create money market accounts and buy or trade CDs. The accounts held under this format are not necessarily FDIC insured.

When you purchase a CD under this scenario the CD may be backed by a bank that is FDIC insured so the CD itself is covered if the bank that issued it fails, but the CD is not held in your name. It's held by the investment firm in "street name" on your behalf, but this is a matter of record keeping. If the investment firm that holds your IRA fails then your CD should be safe because the record of it being held on your behalf should still be on file. If the firm mismanaged your investments or fails and/or loses all records then there's SIPC insurance that generally covers up to $500,000 per customer (which is not the same as FDIC covering $250,000 per account). This does cover any holdings you had with the investment firm including stocks and bonds that have no protections from market exposure. SIPC does not cover normal investment losses of course.

There is no reason to exit an IRA for the sake of financial safety (unless you're at the point of mattress stuffing) and it just exposes you to tax penalties. If your IRA is offered through an investment firm and you're worried about the security of that firm then you can roll over your IRA to a bank IRA and if you have amounts exceeding $250K you can spread that out over multiple accounts within the IRA to maximize FDIC.

on edit: As pointed out below, I should have taken more care in my description of "accounts" within an IRA. This is particularly relevant in terms of how FDIC works. The implication that you can be individually insured for $250K per "account" or holding within an bank IRA is incorrect. FDIC categorizes by certain classes such as general savings versus retirement. Each class is offered a separate coverage limit. Under one banking institution the sum of all the accounts that fall under one category for an individual holder are covered up to $250k. If you were to roll over to a bank IRA and your assets exceeded $250K, generally speaking, you would need to open a separate IRA at another banking institution to have an additional $250K in coverage.

[A HERETIC I AM]

33. Are you a broker?

Because with all due respect, your use of certain terms in your post are incorrect and misleading.

Your pointing out the term "Street Name" tells me you know something about how securities are held and the mechanics of trading and how securities are held in various accounts, but you referred to what are essentially individual securities held in an IRA as "Accounts" which is not correct. The IRA itself is the "Account", not the stocks, bonds, ETF's or what have you held inside the IRA. Those are simply positions.

Nomenclature is important.

An IRA is just a tax shelter that envelopes many different types of accounts that have their own inherent risks and insurances.

No it isn't. An Individual Retirement Account is not a "Tax Shelter" in the classic sense of the term. It is a "Tax Deferred" account, also sometimes referred to as a "Tax Qualified" account, in that one does not pay taxes on gains, or benefit from losses on an annual basis. That term - Tax Deferred - has specific legal and tax implications that are different from a classic "Tax Shelter".

I'm sorry to say, but much of what you wrote is either misleading or flat out wrong, not to mention you were basically reiterating (and rather poorly, frankly) what I had already posted above.

[tandem5]

35. I apologize for using incorrect nomenclature...

I am aware it's not a tax shelter. It was an informal usage. I am aware that an IRA is an account that encompasses holdings (except maybe a sweep account). The thrust of my comment centered on institutional security and where FDIC and SIPC play a role. If what I said there had no accuracy or utility then once again I apologize and defer to your correction.

Nomenclature is important and I understand the distinction between frankness and tact. I hope you do too.

[A HERETIC I AM]

36. I'm sorry my tone was so brusque

I don't know why I have been so crabby recently, but for some reason, I have. Maybe it's stress. Maybe it's because I'm seriously cutting back on sweets and carbs and I want to bake and eat a whole chocolate cake with cream cheese frosting so bad, I might chew my way through the pantry door!

Fair enough. We are on the same page.

All the best.

[tandem5]

37. I understand -- We're all under a lot of stress. Thanks and take care.

[nilram]

30. I read recently that T-bills are a better choice now than money markets.

It’s unlikely that money markets would have a decline, but it has happened at extreme events in the past. I’m looking at moving to T-bills with my cash.

You might consider taking a small amount, say 5%, and putting into a stock fund sometime in the next 3-6 months. After this kind of a decline, it could have a great return. A small amount, as befits your risk tolerance; just a thought.

[DFW]

31. I should have ditched my IRA'S stock position. Just got lazy

I just turned 68 today. I also work every day (normally, anyway), usually in a different country every day.

I am also in the odd position of having moved my residence to Germany AFTER converting my IRA to a Roth IRA. I paid my taxes in full while I was still in Texas. Under U.S. law, whatever was left was mine free and clear, whether its value went up or down. Now, the Germans disagree. "You paid 40% while you were in America? That's nice. We don't care. Give us 50%" The double taxation treaty says they can't touch it. They say they can. Heil Honecker.

So I haven't touched it or taken a cent out of it, all the while watching its value dive about 35% in the last 2 weeks. But having paid the US government 39.6%, if I pay the Germans another 50%, that would leave me with 10.4% of my retirement fund, which is somewhat less than I had counted on to live on if I stop working.