Saving & Investing

Okay I am not sure if I am in the right place but I was looking for some advice on an IRA. My dh had a 401K and when he switched jobs we rolled it into a IRA. Well we opened another retirement acct thru dh's work that gives us a better return on the money because his job matches what he puts in so we put money in there and we were just going to let the IRA grow on its own. We also have a few other savings accts set aside for retirement but because of the economy are making very little. Anyway, we get our tax papers for the IRA and we have lost money a couple hundred dollars. In addition we find out that we have to pay a maintance fee on the acct that is not making us money but losing it.

So my question is do we keep the IRA ride out this whole financial crisis and hope to have something left in the acct or do we pay the taxes and penalty on the acct and stick it in a CD until we can find a better way to make it grow? Either way by the end of next year we will have lost the same amount, approx.

Hi,

Some of the answer for you depends upon how many years you have until retirement.

I have been in the market since 1979 and I have seen it go up and go down although this time is the worst. Everyone is losing value on all investments. I wouldn't pay a penalty to put you funds into a CD if it were me. That would be like losing even more money. I would just wait it out as the economy will get better but it will take time. Probably 5 years is what will be necessary to recover what you ahve lost according to the articles that I have been reading. I hate paying interest on loans or penalties! In my small mind that is just money wasted.

I think it will be interesting to see what others have to say.

Mary Frances

Welcome to this board!  Mary Frances has already given you good advice about your IRA.

I've been in the stock market since 1959, and I've seen so many ups and downs that I can hardly remember them all.  As difficult as it is to do, sitting tight is quite often the best thing to do.  Since your DH's employer matches his contributions, that is a good thing, but remember if that business fails, you might lose all of the money in that account too!  I would keep that IRA and make contributions to it, if you can.  As far as having to pay a fee to maintain that account is concerned, that fee is tax deductible, and in my opinion it is usually worth the money to have them do the bookkeeping for you.

You will lose money on your investment accounts from time to time, but it is a paper loss.  You don't really lose anything unless you choose to sell at a loss.  I will admit that I am choking over the figures we get each month, because we are already retired.  I'm glad that the government is going to let us not have to make the mandatory withdrawals from our IRAs this year.  We would be forced to sell a number of things for great losses.

I just wanted to make a bit of a correction about employer 401K matching and risk.  You said that they might lose the 401K money if her husband's company fails - however that is only true if he is invested heavily in the company stock itself.  If he has put his money into other investments, then the only thing that would happen to his 401K if his company failed is that he would need to convert it to an IRA.