Need IRA Advice

[njstone]

(This has nothing to do with unrest in Ireland...)


My wife and I have Roth IRAs which we stared in '06. Last year, I started loosing confidence in the market and stopped my monthly payments in April...very glad I did that!

So now, I have until April 15th to decide whether to max out our IRA contributions for 2008 (up to $6000 between the 2 of us). I know that money is better invested now than it was last year (I can probably get at least 30% more shares now than I would have had I not stopped payments last year).

But do you think it's a good idea? If we had a ton of liquid cash, I'd go for it--even if the market goes down a bit more, we're still buying a lot of shares for the money right now, and won't be cashing-in these IRAs for 30+ years.

The only reasons I'm hesitant is because my wife starts her next Air Force tour in July, and we may have to move and sell the house--if we do, we'll likely have to pay cash out-of-pocket to sell it (horrible market in Dayton). We'll also need 2 cars in the next 3 years. So I don't want to whittle the emergency fund down too far.

But if this really is a great time to buy, than maybe it would be worth the investment.

So what do you guys think?

 

[cvm4]

If you predict that you need the cash in 6 months to a year, then I'd just hold it in a CD. But if you can max it out, then cut expenses elsewhere to take advantage. JMHO

 

[Jfire]

Figure out what expenses you can forsee. If you're going to need cars I would sacrafice this for that. Buy used cars or less luxury of what you were going to get to lower payments. I'm not a FA. But man the markets are getting hammered right now. And buying power is at a all time high in many years my Cat sock, US Steal and Many others are 70 percent or less then a year ago.

 

[njstone]

I'm not a FA. But man the markets are getting hammered right now. And buying power is at a all time high in many years my Cat sock, US Steal and Many others are 70 percent or less then a year ago.

Meaning BUY?

In theory we can do without that $6000, because my wife is supposed to get her specialty bonus in June...but being that it's the military, it probably won't be until December in reality, lol. I'm just trying to be shrewd and cautious, but it just seems like such a good time to buy that it's tough not to...but what if everything KEEPS GOING DOWN?

 

[jgaeta]

if you don't plan on cashing in for 30+ years, it doesn't matter if they continue to dip for a bit more. the only reasoning against this is if you can see the entire stock market crashing permanently. there are always ups and downs and this is most certainly a downswing and a great time to buy imho if you have the expendable income. if you have faith in the market what-so-ever, buy. if you're that concerned, why not just put in half of what you were planning on doing? that way you get SOME cheap as hell stocks and still have some liquid cash? doesn't have to be all or nothing right?

 

[Tegu]

You dont have to put your IRA in the stock market, you can put it in a fixed intrest or bonds, or a money market. If you can afford to you should put it somewhere.

 

[njstone]

if you don't plan on cashing in for 30+ years, it doesn't matter if they continue to dip for a bit more. the only reasoning against this is if you can see the entire stock market crashing permanently. there are always ups and downs and this is most certainly a downswing and a great time to buy imho if you have the expendable income. if you have faith in the market what-so-ever, buy. if you're that concerned, why not just put in half of what you were planning on doing? that way you get SOME cheap as hell stocks and still have some liquid cash? doesn't have to be all or nothing right?

very true...i'm just an all or nothing guy by personality, lol. I am glad the IRA contributions are limited, that way I have a ceiling here. Of course I could just buy more specific stock (like I might buy Apple when Steve Jobs announces his retirement and the stocks plummet).

I'm definately leaning towards maxing them out for 2008 and then continuing to NOT make contributions in 2009 yet. That's a nice compromise.

 

[BagfullofPings]

You have to spend money to make money. Fortunes can be made right now. Do some research and see what the market did in Oct. 1929. Look at the bottom of the trough in the early 30's. Now see where the market was in the early 60's (A 30 year period). Did the market make money? Yes it did regardless of a major depression, two major wars, a nuclear war threat, and a presidential assassination.

If you can piss away the money, go for it.

If you might need to use it, put it into the savings account.

Jason

 

[Mitch]

Considering there are no reliable bets in this ecomomy I'd say play it safe and stick with cash/CD's for now. If you will be buying a new home it may be a better investment than anything else right now, buyers market for sure.

 

[stogies&hoagies]

Depends on if you need the money at the moment. Another factor to consider would be your tax obligation this year. Will you get a refund or owe money when you do file? I am a huge believer in investing. Depending on your personal situation I would put at least a portion, if not all that I could in the IRA.

Are you aware you can withdraw money from a ROTH IRA without penalty? That's because you've already paid taxes on the money in there.

 

[tedski]

My two pennies worth ...

1. I would not invest much in stocks right now unless you are doing it on a short term basis in selected areas. There are still many places to make money, but you need to keep a regular eye on things as it's still very volatile. I don't think we've seen the bottom yet either.

2. No reason to completely shut off monthly IRA contributions unless you are in a cash crunch. Do a budget and see how much you can comfortably put away without affecting your lifestyle and known future expenses. You will be really glad you kept saving ... because even small amounts will add up BIG over 20-30 years. You might just do this rather than putting in a big lump sum payment right now.

3. Make sure your IRA is diversified. Right now it should lean more toward money market funds, high quality corporate / muni bonds, gold and some quality, dividend paying stocks (Altria, AT&T, Consolidated Edison, etc.). Once the market starts going bullish, you can redo your allocations more toward stocks.

 

[jkim05]

The money necessary for the move should be unrelated to money being invested in the market. If you have a sufficient cash reserve, I think you can only stand to gain by investing in a balanced portfolio. The purpose is to get money in there so that you can get some of the gains and also maximize your tax benefits.

 

[BagfullofPings]

Depends on if you need the money at the moment. Another factor to consider would be your tax obligation this year. Will you get a refund or owe money when you do file? I am a huge believer in investing. Depending on your personal situation I would put at least a portion, if not all that I could in the IRA.

Are you aware you can withdraw money from a ROTH IRA without penalty? That's because you've already paid taxes on the money in there.

You can only withdrawal the funds without penalty after you have held the account for 5 years.

 

[stogies&hoagies]

Ooops, absolutely correct. Sorry about that, chief. Still, it's a nice "out" if you get in a jam.