In light of the recession.....

I'm not sure. But mostly I am taking my money out of the dollar.

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Amigo wrote:

I'm not sure. But mostly I am taking my money out of the dollar.

Care to elaborate? I'm not keen on investing.
You're investing in international funds? or...........???

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Re: In light of the recession.....

jasonrest wrote:

In the light of the upcoming (or the current) recession,
what should one do about current holdings i.e. CD's, IRA's?
While it is true that these institutions are FDIC insured,
should I still be concerned?

IRAs are not FDIC insured.

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Linkat- I believe that you are mistaken. Here's something, right from the "horse's mouth".

Quote:

Misconception Number 7: Each beneficiary named on an IRA (Individual Retirement Account) increases the FDIC insurance coverage.

No, the number of beneficiaries on an IRA does not affect insurance coverage. This misconception appears to be based on confusion with the rules for per-beneficiary coverage of revocable trust accounts, as described below.

Under the FDIC's new rules that became effective April 1, 2006, up to $250,000 in insurance is provided for the deposits a consumer has in a variety of retirement accounts, primarily traditional and Roth IRAs, at one insured institution. The previous coverage limit in this category was $100,000. For more details, see FDIC Insurance: What's New, What's Not.

http://www.fdic.gov/consumers/consumer/news/cnspr06/leadstory.html

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jasonrest wrote:

Amigo wrote:
I'm not sure. But mostly I am taking my money out of the dollar.

Care to elaborate? I'm not keen on investing.
You're investing in international funds? or...........???

I'm not keen either. I'm just pretending. Yes I put my monet in international investments so that as the American dollar drops my money stays up with the other currencies.

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Phoenix32890 wrote:

Under the FDIC's new rules that became effective April 1, 2006, up to $250,000 in insurance is provided for the deposits a consumer has in a variety of retirement accounts, primarily traditional and Roth IRAs, at one insured institution. The previous coverage limit in this category was $100,000. For more details, see FDIC Insurance: What's New, What's Not.

http://www.fdic.gov/consumers/consumer/news/cnspr06/leadstory.html[/quote]

I work in this industry and most IRAs are not insured. Perhaps as I noted here there a certain ones that are insured (depends on what the IRA is invested in - here is an exerpt from a website describing how these are not insured.

"Non-deposit investment products and trust services offered through FPT and FMTC and their affiliates are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, are not obligations of any bank, and are subject to risk, including possible loss of principal. These services provide discretionary money management for a fee."

Logically IRAs that are invested in Mutual funds cannot be insured. The whole idea of an equity mutual fund is the risk/reward situation. You can lose principal when investing in mutual funds and therefore in theory you could lose your prinicipal. I suppose it would depend on what the IRA is invested in. I would not want an IRA that was invested in such safe items that it didn't generate much return.

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Everyone should have an IRA of some variety, it should not depend on the state of the economy. How you invest your retirement money has more to do with your age and risk aversion, and not if we are in a time of boom or bust.

If you are looking for safe investments you can consider things like CD's and T-Bills. However Jason, since I think you are fairly young, you might want to take a class on investing in stocks and bonds. Learn the basics before doing anything. My best long term investments have definitely been stocks that pay dividends and a few lucky picks from the mid-80's that have split a few times.

The best advice financial advice I can give is stay out of debt. Learn to live on less than you earn. Good luck

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Green Witch wrote:

Everyone should have an IRA of some variety, it should not depend on the state of the economy. How you invest your retirement money has more to do with your age and risk aversion, and not if we are in a time of boom or bust.

If you are looking for safe investments you can consider things like CD's and T-Bills. However Jason, since I think you are fairly young, you might want to take a class on investing in stocks and bonds. Learn the basics before doing anything. My best long term investments have definitely been stocks that pay dividends and a few lucky picks from the mid-80's that have split a few times.

The best advice financial advice I can give is stay out of debt. Learn to live on less than you earn. Good luck

I'm 26.
Very useful advice.

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Re: In light of the recession.....

Linkat wrote:

jasonrest wrote:
In the light of the upcoming (or the current) recession,
what should one do about current holdings i.e. CD's, IRA's?
While it is true that these institutions are FDIC insured,
should I still be concerned?

IRAs are not FDIC insured.

Yeah you're right.
In light of this and also the recession mentioned earlier
should I remove the funds (a significant amount) from the IRA and invest
elsewhere.

0 Replies

Re: In light of the recession.....

jasonrest wrote:

Linkat wrote:
jasonrest wrote:
In the light of the upcoming (or the current) recession,
what should one do about current holdings i.e. CD's, IRA's?
While it is true that these institutions are FDIC insured,
should I still be concerned?

IRAs are not FDIC insured.

Yeah you're right.
In light of this and also the recession mentioned earlier
should I remove the funds (a significant amount) from the IRA and invest
elsewhere.

If you liquidate your IRA you will pay huge penalities. IRA's are designed to be cashed in when you retire and not before. I have numerous investments that make up my IRA, including individual stocks, bonds, and a mutual fund. Technically, an IRA itself is not insured, but you can choose investments that are. Most of mine are not because buying a stock is not covered. Am I missing something here? As to CD's - you can decide not to roll them over, but you can't cash out before they are due. Same for T-bills and some bonds. I believe CD's are insured just like bank savings accounts are. What are your investments Jason? What kind of IRA do you have?

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-Green Witch
I was only considering cashing out the IRA because of its lack of insurance.
but If I am understanding you correctly I can rearrange the IRA so that it holds something that is insured....???

The cd's are locked in. I know well enough not to touch
those unless in an instance of urgency.
My main concern is the recession.
I have seen a couple of banks go belly up and it got me to
thinking.

And just to be sure these recent bank failings have everything to do
with the recession, foreclosures and so on, right?

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jasonrest wrote:

-Green Witch
I was only considering cashing out the IRA because of its lack of insurance.
but If I am understanding you correctly I can rearrange the IRA so that it holds something that is insured....???

The cd's are locked in. I know well enough not to touch
those unless in an instance of urgency.
My main concern is the recession.
I have seen a couple of banks go belly up and it got me to
thinking.

And just to be sure these recent bank failings have everything to do
with the recession, foreclosures and so on, right?

You are overreacting. This is not 1929. You would be crazy to dissolve an IRA, the penalties are in 20% range. You are too young to worry about short term. At the age of 46, I've lived through numerous economic bumps both big and small. I started my IRA when I was 18 and I've never thought to use the money, although I do move the investments around. We are certainly headed for a dip and you might want to put some your available funds into some European investments, but overall the economy goes up and down up and down- learn to use it to your advantage. I actually consider it like a department store sale. It can be a good time to buy into the market. Stocks I might not have been able to afford five years ago I can take another look at. If I believe in the company long term, I will buy. Everyone says buy low and sell high - well the lows are coming. The most amount of stock I ever bought was in October 1987, it was the week of a crash. I was betting that the market would recover- and I was right. I sold those stocks in the mid- 90's and invested it in real estate. I would love another opportunity to do it again.

Granted, this administration has created an incredible amount of tax payer debt and it's basically let's corporations act like spoiled 6 year olds at a toy store, but I still believe in the foundation of our system - at least for another decade or so.

I'm not suggesting you buy stock in GM or a mortgage company, but I think you could look in alternative energy stocks or companies that you think might have something to offer the next generation of consumers. You are young enough to gamble a little. You can buy stocks and put them in your IRA. You can also look into buying stocks that average the markets (ie SPDR referred to as "spiders", talk to a financial advisor for details). It's a safer way to invest than picking individual stocks, but different from a money market or muni-fund. Stay away from things like gold, it's mostly for suckers or people who really understand currencies.

By the way, your CD's should be insured up to $100,000 if they are with a standard US bank.

I suggest you read:
Grow Your Money!: 101 Easy Tips to Plan, Save, and Invest
by Jonathan D. Pond
The Only Investment Guide You'll Ever Need by Andrew Tobias

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You have been more than helpful.
I will definitely pick up that book.
I have read others but whatever I retained was forgotten
simply because I was not actively investing.

One more thing.
Don't you think, you're under-reacting just a little.
"HE" is fighting this war on borrowed money, the Canadian
dollar is worth more than mine and that hasn't happened in decades.

I will admit to being paranoid if you will admit to
being too relaxed. I didn't mean a depression but....
I would never claim to inform another on these matters.

I don't know as much as I should about
these things but I know enough to understand that
**** is fucked up right now.......RON PAUL.....FTW.

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A full three page ad in todays New York Times sheds some light on the confusion about FDIC insurance on Bank IRAs. The add stresses (large print) that these IRAs are not FDIC insured. In the finest print at the bottom of the page it mentions that IRAs offered through the bank's brokerage department are not insured but those issued through the bank itself are insured.

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Re: In light of the recession.....

jasonrest wrote:

Linkat wrote:
jasonrest wrote:
In the light of the upcoming (or the current) recession,
what should one do about current holdings i.e. CD's, IRA's?
While it is true that these institutions are FDIC insured,
should I still be concerned?

IRAs are not FDIC insured.

Yeah you're right.
In light of this and also the recession mentioned earlier
should I remove the funds (a significant amount) from the IRA and invest
elsewhere.

I am not a financial planner so I cannot tell you where to invest your money, but I can tell you this - do not take your money out of an IRA - you will be penalized and taxed and an IRA is an excellent investment vehicle.

At 26, you should be investing in more risky items. Growth type funds - you should contact the company that you invested your IRA with and get advice from a liscenced planner. I work in the industry, but work from the accounting/tax side - I do not advise people on where to put their money, but do understand these vehicles.

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jasonrest wrote:

-Green Witch
I was only considering cashing out the IRA because of its lack of insurance.
but If I am understanding you correctly I can rearrange the IRA so that it holds something that is insured....???

The cd's are locked in. I know well enough not to touch
those unless in an instance of urgency.
My main concern is the recession.
I have seen a couple of banks go belly up and it got me to
thinking.

And just to be sure these recent bank failings have everything to do
with the recession, foreclosures and so on, right?

If you invest in "insured funds" you will make crap on your investments. At a young age if you diversify your investments (invest in a variety of vehicles), it lowers your risk while increasing your returns. Since this is long term, you also do not need to worry about the market tanking - you have time to wait it out (40 years or so). Over the long term the market has steadily increased (there are short term dips, but overall you get huge returns).

Also, consider that now the market is cheap. Any money you put in now will cost you less. Taking out your money now will guarantee a loss, leaving it in or investing now when it is down or cheaper, will give you the best shot at making more.

What planners usually recommend is to invest by dollar cost averaging - this is you put away $50/$100 whatever you can afford monthly. When the market is down you get more shares, when the market is up the value of your investments are worth more.

I highly suggest talking to a professional.

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jasonrest wrote:

You have been more than helpful.
I will definitely pick up that book.
I have read others but whatever I retained was forgotten
simply because I was not actively investing.

One more thing.
Don't you think, you're under-reacting just a little.
"HE" is fighting this war on borrowed money, the Canadian
dollar is worth more than mine and that hasn't happened in decades.

I will admit to being paranoid if you will admit to
being too relaxed. I didn't mean a depression but....
I would never claim to inform another on these matters.

I don't know as much as I should about
these things but I know enough to understand that
**** is **** up right now.......RON PAUL.....FTW.

You are overreacting most likely - unless all your money is in a mortgage company or a bank that has been hit with the subprime mortgages, there is no need to panic. If you have all your money in Countrywide, I would worry. If you have your money in a mutual fund though, they probably own a hundred securities and maybe at most 5% is in companies that are affecting by this. There is another 95% that is not.

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Everyone has been more than helpful.
The bulk of my money is in Cd's.
I do have an IRA which doesn't hold
much and my monthly deposit is modest.

I have read that I should be much more
aggresive at my age. I'll be calling my planner today.
Thanx everyone.

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If you get serious now, you can have a very comfortable retirement.
Here's a link for a retirement calculator, just fill in the numbers:

How much you need to save to retire

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In light of the recession.....

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