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Retirement Investment
Entered on: March 24, 2009 9:03 AM by Jackzilla
Okay, like everyone else I've been disgusted with the huge drop of my retirement account the past year (though the market had a 500 point gain yesterday!).  
I was doing my taxes over the weekend and am at the point of deciding whether to contribute to my Roth IRA this year. I can put up to $5K in this year -- and all the experts tell you that the Roth IRA is like a gift from the government and that you pretty much gotta take advantage of it. But when I see that basically my last three years of contributions have disappeared (post-tax money!) it's hard to throw more in. Plus I'm looking at cars (to replace the '93 Saturn) and that $5K would make a nice down payment.  
What's everyone else doing? I s'pose I should throw it in there. I don't want to retire and not have money to pay someone to wipe my ass.

NEWS 624 - 7 Comments
From: Ross Entered on: March 24, 2009 9:38 AM

I don't have a Roth IRA but I do contribute to my 401K and haven't stopped.  I have a couple of friends who have completely liquidated their 401Ks and put everything into a cash fund.  I think that's kind of crazy, personally - but it's not as crazy as not contributing to your retirement at all! 

So for me, it's about re-allocating future investments a bit (and choosing low-fee or index funds) but keeping at it - you have no chance to recoup your losses if you don't remain in the market at all.  I suppose that sounds like a cliche at this point but I think doing anything else and hoping it turns out better is kidding yourself.

From: Jackzilla Entered on: March 24, 2009 10:23 AM

To be clear we still have a 401K plan (thru Ang's work) that we continue to pay into (maxing the company match and then some).  And we haven't taken anything out of either retirement account.

I guess I know the answer to my own question.  Misery likes company and all.  It's just hard psychologically... I wanna skip this year!  But I won't -- hopefully things are bottomed out and start to recover soon.  I just gotta keep thinking about when I retire and all that Roth money I get to take out tax-free!  And hopefully 2008/09 will just be a blip on the graph...

From: RobotSpider Entered on: March 24, 2009 11:07 AM

Arguably, since the market is down right now, it's the best time to put money in.  Sine everything is cheap, you're buying more of it, so when it goes up, you've got that much more value down the road.  Everyone (mostly investors/bankers) keeps saying "it only matters when you take it out"... That doesn't make it any easier to lose double-digit percentage points every quarter... but at this point, I can't expect social-security to be there, so why should I expect my 401k (IRA/ROTH-IRA/Money Market account/etc) to be there?  Ross is right; not-contributing isn't even an option--considering that $100 you put in now will be worth $4000 or more (you do the math, that's a guess, but you get the idea) when you consider compound-interest and growth.

That said, if that money can reduce or prevent you from needing an auto-loan, you'd have to look at what the total cost of the car, with loan interest, would be vs. how much you'd be giving up by not contributing to the IRA.  My guess is that you'd still want to contribute to the ROTH, but that's just a guess.

From: BigFatty Entered on: March 24, 2009 1:11 PM

I understand how you are feeling.... but man.  If you were going to invest at all, *THIS* is the time to be doing it.  I wish I had money to throw into the market.  I told you a few weeks ago I 'found' a grand sitting as cash in an investment account.  30 minutes later that cash was gone - fully invested.  Both stocks up significantly - one 50% up.  Its not too difficult to pick some winning companies in today's atmosphere.  Most companies have taken huge hits to their share price.  It is bargain basement shopping!  If you have cash, use it.

You really are not broke, you did not really lose any money.... yet.  Sell any of your shares and sure, you will take a loss.  All you have lost at this point is expected value - what you thought you would get when selling.  You still have the same amount of shares.  That has not gone down.

Fatty advice - invest the full five right now.  Throw it right into your 500 index fund for simplicity.  If you want to do a little work, look at the industries that have taken a beating (not the auto!) and pick the strongest company to invest.  My favs are still the Big Banks.  Things are settling down some, but it is a great time to pick some up.  I would gamble some on Citi.  It was around a buck!  Yes, it could go under...  I doubt it.  It is the largest US bank with 20% of the market alone.  The Feds are pumping money into it to keep it from going under.  MS is buying Citi's Wealth Management division for some serious cash.  Banks are my bet.

Of course you need a car.  Take advantage of the market.  They will be offering all sorts of incentives to buy cars.  Loans are dropping.  Use most of your money for investment, but you might need some for a downpayment - avoid this if you can.

This is the environment where smart people make out like bandits!

From: Jackzilla Entered on: March 24, 2009 1:44 PM

Awright!  It's as good as done!  Vanguard:  Check your mailbox!

Fatty - Do you really recommend buying much individual stocks?  What/who are you using to do this?  I own one stock of Marvel but I'm not rich yet.

From: BigFatty Entered on: March 24, 2009 3:30 PM

Actually I don't recommend you buy individual stocks unless you are very knowledgable about the industry, like doing the research, have the time and inclination to follow the stocks for many years, like the high risk factor, etc.  All you need is an account at a discount broker - Ameritrade, Schwab, Etrade.. but most of those eat away at your cash if you are not an active trader.

But, in todays environment, a little research and common sense could lead to some nice returns in the short run... then roll that loot over into the index fund.  Over the long haul - the S&P 500 will always beat you or any other fund.

Keep in mind, I've been burned many times by individual stocks.  The reality of things is... nobody really knows what the future holds.  Holding a few stocks is very risky if one or two tank.  But owning a piece of the top 500 companies spreads out your risk AND you are only owning the BEST companies. How can you do better than the best?


From: Jackzilla Entered on: March 18, 2010 9:46 AM

Well, it's that time of year again.  Looking back, as hard as it was at the time, I'm certainly glad I contributed last year:  Most of the initial drop has recovered.  Vanguard: Check your mailbox!


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