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Old 05-29-2013, 04:05 PM
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Default Liquidated IRA funds - Now what?



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No, I didn't withdrawal my IRA, but I did sell my stocks within the account and currently hold it in cash.

My wife has more in her 401k than I do in my IRA (rolled over from an old job) and I'm a little hesitant to continue funding the IRA in such a high market. Rather than placing my extra income in the IRA, I've been purchasing PMs, food, and ammunition. - My wife continue to contribute for the employer match purposes.

My wife and I are starting to look for our first home, and since we would qualify as first-time home buyers, I'm considering using the IRA to fund the down payment since there are no tax penalties in that regard. This would keep us from having to dip into our safety-net savings.

I am very pessimistic in this market, and have no idea what to expect in the next 20+ years.

For those of you that have considered all the options, what would you recommend? - Continue IRA contributions, halt contributions, withdrawal for a home, etc. ?

I'm 26, my wife is 33, and we have very little debt (a car payment and about $4k in student loans - That's about $300/mth. We will possibly buy-out the vehicle next June. My truck is paid off.). - We are also expecting our first child in January. I want to make sure I'm doing all the right things and have my finances directed in the right way.
Old 05-29-2013, 04:13 PM
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Hmmm, at 26 I would be tempted to have you heavily in the stock market, because it will *probably* be the highest return you are going to get over the next 30 odd years.

Having said that, I have also pulled back to a large amount of cash both in taxable and IRA....not really that I think the market is going to totally crash, but my account was up 27% ytd and I think I should not be greedy. My plan is to either enter the market if it has corrected by 10% over the next 3 months or use the money to pay off our house (not the IRA money...that needs to go back into the market pretty quickly).

With a child, I like the idea of you building up a big emergency fund outside of your IRA...so whatever lets you do that is good. This emergency fund should be in FDIC protected accounts.
Old 05-29-2013, 06:33 PM
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Thanks for the reply.

My main issue with continuing to fund my IRA at this point in time is that I'd be buying high. Even if I have no plan to sell anytime soon I don't see an upside to that.

I did some active-trading in my IRA this year during the gun-panic and managed to increase my account by about 20% trading CAB and RGR. Helps to hold me over a bit.
Old 05-29-2013, 06:43 PM
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Pay off debt before you buy your house! Also try and save more for a LARGE down payment, maybe %50 if you can. Having a new home and a new baby is a lot to take on all at once. Maybe keep renting and saving, that way you will better know how your budget is. If your kid goes to daycare, i hear that eats up a lot of people income!

As a young couple, the 2 biggest thing you can do are stay debt free and save! Problem with all of us when we are younger is that we dont want to hear the hard truths. I sure wish i did. Me and my wife TAKE HOME a combined $100k a year. And we feel broke from years of trying to keep up with the jones! We have gotten better and paid off almost $20k in debt over the last year, and plan to have the last $6k paid of in 4 months(of credit card debt). Then sending $2k a month to pay of her $36k car she had to have which we owe around $27k. Then after all that, sending $3500 a month to pay of the house which we still owe $155k on.

Only reason i am telling you this is to let you understand that i been there and wish i would have listened. We would have been so much better off if we stayed out of debt!
Old 05-29-2013, 06:47 PM
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If you're only 26, then you have at least a 40 year window before you might need to begin withdrawing those funds.

A 40 year window for investment purposes is awesome. Given that, buying high or low, 40 years from now it isn't going to make a huge difference. Cost-averaging over 40 years is likely to return pretty decent profits regardless.

Internet forums are notoriously poor places to get financial advice, so don't believe a word I say - that said, I'd invest your funds into a well-balanced portfolio that includes possible ~20-25% very-short-term bond funds, about 10%-15% foreign stocks, about 25% growth stocks, another 25% value stock funds, and then some exposure to small caps or something like one of the Vanguard Index funds. If you're into metals, you could have a small position in gold, but pay attention to the volatility - its more of a hedge against loss, and given a 40 year window you're better protected than many older folks against the inevitable profit-taking or other reversals that will be coming along.

Good on you for getting started so young. Now's not the time to spend it all. Find an advisor you trust, do some talking, and see if you can't put that money to work for you. In another 20 years or so, that money will have grown into a sizeable chunk that you'll be in a position to leverage for even higher gains.

Just MHO. Talk to several professional advisors and see what they tell you.
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Old 05-29-2013, 07:16 PM
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I understand that using a retirement account for buying a home can be an iffy decision, but considering the housing market where I am, I can't help but feel that it's not a terrible idea. It would give me the opportunity to buy real estate low, and put my money into property without getting hit with a penalty for early withdrawal. It's not like I'm cashing it out to buy a shiny vehicle.

Continuing to rent is certainly an option, but regardless, we'll need a bigger place, and we both know we would like to stay in the area. I can't see a huge benefit of renting when I could be putting that money towards a home.

Neither my wife or myself are big spenders, and we have no interest in toys (except me and my guns). - We have no CC debt, only the one car payment, and the $4k in student loans which we could increase our payment towards. We both live very frugally.
Old 05-29-2013, 07:41 PM
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IMHO - "paper wealth" will be as valuable as used bathroom tissue.
Trade it for what you want / need now.
As to housing, buy a sturdy, durable, functional one - not a cosmetic money pit.
Sadly, newer housing is not always better than used housing. Builder grade crapola that they put in tract houses will sour the experience.

Don't discount the odd ball house - it may be a keeper if it was built well.
Old 05-29-2013, 08:07 PM
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Buy the house; calculate if you can afford the payments for a 15 yr mortgage. Make sure you include necessary repairs, outbuildings, replacement value insurance, etc. CYA in other words. They ain't makin any more land.
Old 05-29-2013, 08:12 PM
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My suggestion is to speak with an investment adviser who is a fiduciary. Frankly, I have wracked my brains trying to puzzle out the best place to be in this environment, but there are no markets left that aren't rigged. Cash is no more of a safe haven than your IRA, imo. You might as well try to get a return on your money without taking a big tax hit. If things go south, it won't matter where your money was anyway.

My ideal scenario would be to invest more heavily in PMs and ag land. Unfortunately, unless I am willing to take a HUGE tax hit, I can't do that. I'm not willing to put it into a gold IRA, because if you don't hold it in your hand, you don't own it.

Frankly, it feels like monopoly money to me at this point. What feels real is the land beneath my feet, the roof over my head, and the food growing in the garden.
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Old 05-29-2013, 08:17 PM
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You are way too young to keep your money on the sideline. Based on your age, I can't imagine it is enough to change you life so you might as well let it work for you long term instead of withdrawing.

I like the idea of a target retirement fund and just let it ride. This will perform automatic asset allocation as you age and get closer to the target date. If you want to be more conservative, choose a fund with a date 10 years closer than you plan to retire to lessen your exposure to stocks.

As for not contributing any spare money, I would also advise against that approach. The key when starting out investing is to put as much away as quickly as you can. There may be corrections (crashes) along the way, but if you are a buyer when the market is low as well as high it should blend itself out well over the long term. It is too hard to time the market accurately.

Everyone was praising PM as a great investment, and they actually had the bubble burst before the stock market, even with all the printing of money. I didn't see anyone making that prediction.

Be in stocks but be defensive. Asset allocate, set up stop orders and guard your losses.
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Old 05-29-2013, 08:25 PM
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The normal thing to do is to just keep funding your accounts and allow dollar cost averaging to work. You are way too young to be timing the market.

Pulling some for a down payment is alright.
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Old 05-30-2013, 11:26 PM
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The stock market has done squat for my portfolio in the past 15 years, so I'd be more tempted to take liquid cash and start your own business. You can make way more money by old fashioned capitalism than gambling and praying. At 26, I was still renting, had student loans, debts, etc. The idea of saving money for retirement was ridiculous compared to paying down the debt sitting right in front of me.
Old 05-31-2013, 01:06 AM
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You should consider still contributing to your IRA. There are annual limits on how much you can stick in there, and if you don't put it in, you don't get another chance.

You don't have to 'buy high'. Is there a fixed income fund you can buy into? You won't get any return, 1percent maybe, but the money is in their and you can buy on the dips/pullback.

Also, your tax bill will be less at IRS time if you contribute as much as you can, since that is pre-tax money.
Old 05-31-2013, 08:56 AM
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Quote:
Originally Posted by bigtexan99 View Post
You should consider still contributing to your IRA. There are annual limits on how much you can stick in there, and if you don't put it in, you don't get another chance.

You don't have to 'buy high'. Is there a fixed income fund you can buy into? You won't get any return, 1percent maybe, but the money is in their and you can buy on the dips/pullback.

Also, your tax bill will be less at IRS time if you contribute as much as you can, since that is pre-tax money.
IRA= 5k/yr, 401k= 15k/yr. - Since IRA's are self-directed, you already pay the taxes prior to contribution, 401k's are pre-tax, correct?

The main reason I'm avoiding contributions to the IRA is so I can save for a home and continue to buy preps. As aforementioned, we continue to contribute to my wife's 401k, and we may up contribution by a small amount. We're expecting a child in January, so we're just trying to make the best short-term AND long-term decisions.
Old 05-31-2013, 09:21 AM
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So, I think you need the psychological stability of owning your own place. Don't go extravagant and buy more house than you reasonably need; get some acreage. Put as much down payment on it as you can; keep the mortgage duration short.

Plan ahead; how long will you want to live there? (will 10 years be too long?) Will you have a passel of kids by then, that need more space? You should have enough equity (w/15 yr mortgage) in 10 years to trade up.**

You'll still be contributing to retirement and at your age (you youngster, you) you've got time to make up any loan you make to yourself from the IRA for the downpayment. And it's not like you don't have the other contributions.

**The caveat of course, is that no one can predict the future and we must plan for things staying reasonably like they are now, as one possibility.
Old 05-31-2013, 10:15 AM
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Hi- I work in finance- I’m a broker and a licensed financial advisor, so I have actual experience here. My thoughts, not advice, as I don’t know your specific circumstances are as follows-

Quote:
My main issue with continuing to fund my IRA at this point in time is that I'd be buying high. Even if I have no plan to sell anytime soon I don't see an upside to that.
Read more at http://www.survivalistboards.com/sho...QUi3tsCMo16.99
If you fund your IRA you don’t have to buy anything with the funds (if this is a “brokerage” type IRA, which it sounds like it is). Brokerage IRA all have a moneymarket or “savings” type cash holding tank. They are not paying any interest to speak of now, but this still allows you to contribute to your IRA but not buy any investments or stocks, bonds, or mutual funds, etc.

Also, as a few others have mentioned- contributing to an IRA can reduce your tax liability at the end of the year. Also, because you can only contribute a maximum amount per year ($5,500 for 2013), you should contribute now so that if a buying opportunity presents itself, like late 2008 through early 2009, you are in a position to take advantage of it.

Quote:
IRA= 5k/yr, 401k= 15k/yr. - Since IRA's are self-directed, you already pay the taxes prior to contribution, 401k's are pre-tax, correct?

Read more at http://www.survivalistboards.com/new...il0m8gA4Coo.99
CAREFUL here… those are the old limits. Now IRA is $5,500 if you are under 50 years old, $6,000 over 50. 401k limit is now $17,500. Also, this is partially incorrect about the tax status. 401k’s are funded with pre tax dollars. Traditional IRA’s are also funded with pretax dollars (usually)- you may be confusing the two because the money goes in after you pay tax on it, but when you file your taxes at the end of the year you get back the “pretax status” of those funds in the form of a bigger refund or by reducing the amount that you owe (again usually). A Roth IRA uses after tax dollars and you do not get a tax deduction. The big difference is that when you retire and withdraw the money from an IRA or 401k the funds that you take out are taxed as ordinary income. Funds removed from a Roth IRA are not taxed.

If I was in your situation- again this is not advice, I would invest in high quality stocks that pay a good dividend and set them to dividend reinvestment (that is, that you receive more share of the stock as dividends instead of cash). This way you are increasing your number of shares in a compounding manner. You have a long time until retirement, and this could be a powerful strategy so that you retire with a nice little nest egg. Just like people here like to have redundancy built into fire starting, food stores, tools, etc; finances should have redundancies as well. Think of this as one piece of the pie- you need money for right now, a little further down the road, far down the road, and for retirement… Yes, the world may implode tomorrow and that money may have been better spent on preps.. But what if it doesn’t? What if the real SHTF situation is that you out live your money?

Bottom line- talk to a licensed financial advisor (find one that you trust- not some used car salesman type guy) and get specific advice tailored to your circumstances- beware anyone who wants to sell you or recommend you anything, or wants to talk product or strategy before really getting to know you and your situation.
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Old 05-31-2013, 05:45 PM
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Quote:
Originally Posted by TipsyMutt View Post
Hi- I work in finance- I’m a broker and a licensed financial advisor, so I have actual experience here. My thoughts, not advice, as I don’t know your specific circumstances are as follows-



If you fund your IRA you don’t have to buy anything with the funds (if this is a “brokerage” type IRA, which it sounds like it is). Brokerage IRA all have a moneymarket or “savings” type cash holding tank. They are not paying any interest to speak of now, but this still allows you to contribute to your IRA but not buy any investments or stocks, bonds, or mutual funds, etc.

Also, as a few others have mentioned- contributing to an IRA can reduce your tax liability at the end of the year. Also, because you can only contribute a maximum amount per year ($5,500 for 2013), you should contribute now so that if a buying opportunity presents itself, like late 2008 through early 2009, you are in a position to take advantage of it.



CAREFUL here… those are the old limits. Now IRA is $5,500 if you are under 50 years old, $6,000 over 50. 401k limit is now $17,500. Also, this is partially incorrect about the tax status. 401k’s are funded with pre tax dollars. Traditional IRA’s are also funded with pretax dollars (usually)- you may be confusing the two because the money goes in after you pay tax on it, but when you file your taxes at the end of the year you get back the “pretax status” of those funds in the form of a bigger refund or by reducing the amount that you owe (again usually). A Roth IRA uses after tax dollars and you do not get a tax deduction. The big difference is that when you retire and withdraw the money from an IRA or 401k the funds that you take out are taxed as ordinary income. Funds removed from a Roth IRA are not taxed.

If I was in your situation- again this is not advice, I would invest in high quality stocks that pay a good dividend and set them to dividend reinvestment (that is, that you receive more share of the stock as dividends instead of cash). This way you are increasing your number of shares in a compounding manner. You have a long time until retirement, and this could be a powerful strategy so that you retire with a nice little nest egg. Just like people here like to have redundancy built into fire starting, food stores, tools, etc; finances should have redundancies as well. Think of this as one piece of the pie- you need money for right now, a little further down the road, far down the road, and for retirement… Yes, the world may implode tomorrow and that money may have been better spent on preps.. But what if it doesn’t? What if the real SHTF situation is that you out live your money?

Bottom line- talk to a licensed financial advisor (find one that you trust- not some used car salesman type guy) and get specific advice tailored to your circumstances- beware anyone who wants to sell you or recommend you anything, or wants to talk product or strategy before really getting to know you and your situation.
This is the first sane financial advice I have ever seen on this site, and is exactly what you should do.

High quality dividend stocks are about as good as it gets if you want to minimize risks. Companies like Chevron, Wells Fargo, Pfizer, Exxon, and Philip Morris aren't going anywhere, ever. There are even mutual funds made up of such funds that do most of the work for you. At 33 years of age, I personally invest large portions (25% each) of my 401k into BlackRock Equity Dividend Fund Institutional Shares (MADVX) and T. Rowe Price Dividend Growth Fund (PRDGX).

If you are completely risk averse, a bond fund like PIMCO Total Return Fund Institutional Class (PTTRX) might be more up your alley. The returns won't be as substantial, but you can look back at the history of that fund and see that it never really crashed when everything else around it did, and still returns about 6-7%. I have about 20% of my 401k in this mutual fund.

Other things are riskier, but can provide more returns. It's all up to how much risk you are willing to take with your investments.

But for the love of all that is good in this world, do not "invest" in preps.
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Old 05-31-2013, 11:45 PM
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Get rid of debt, then buy acarage if you don't already have some and start working it now.
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