Question about an IRA - cash out or hold on?

[Dover]

I guess your answer to my question will depend on what you think will happen in the short and long
term with the markets.

I have watched my IRA decline somewhat and wonder if I should take the hit and just cash out rather
than wait for it to plunge further. Not that there's any place better to put it, but it might be safer just sitting in a bank savings or CD even at low interest rates. At least I'd have access to it if I needed it. I'm just thinking that the market is going to collapse much more and probably will take a loooong time to return (if at all). So that makes the initial hit for early withdrawal seem more attractive a choice.

Alternative ideas?

[Merlot]

1. Keep the money in an IRA, invest it in CD's or bonds

don't take the money out of the IRA or you'll pay fees. Is it a self-directed IRA? Can you choose where it's invested?

If you can transfer it to a mutual fund company (vanguard, etc) you can control where the money is invested in mutual funds for stocks, bonds, or money market.

[Dover]

8. Thanks for the input. I'll look into the options available WITHIN the fund.

I have it in a vanguard-like fund. I just don't have a feel for how these funds in general will
do. Regardless of where you move your funds with them (bonds, stocks, etc), are they as safe as
a bank? I guess that's really my question.

[A HERETIC I AM]

10. No.

Regardless of where you move your funds with them (bonds, stocks, etc), are they as safe as
a bank?

There is NO truly "safe" investment. There is risk inherent in everything, including sticking it in your mattress. Your house could burn down, right?

The more reward you are looking for, the more risk you have to take. If you are happy with long term returns that lose to inflation, put your money in CD's. They are insured (for the most part) and therefore fairly safe.

The answer to your question is that no Mutual Fund is as safe as an FDIC insured savings account at a bank.

But if you are happy with 1% returns, then that's where your money should be. But leave it in an IRA account.

[hendo]

2. Well

if you take it out you will be taxed an arm and a leg on it.

You could take it out, but depending on when you are planning on retiring it would probably be better to keep your money where it is.

[Muttocracy]

3. how long to retirement? nt

[Dover]

4. A looooong time until retirement.

It is in a Vanguard-like account. But is that really safe (regardless of where you move it)?

[sendero]

6. I think ...

.... bank CDs are the safest place right now. You are protected up to 100K ( or is it 150K now? ) so if you have more than that spread it among different banks. You should leave it all IN your IRA so you don't pay the 10% penalty plus "income" tax on it. This is all quite doable.

As for the stock market, it is enjoying a small respite from it's inevitable decline to the 4000 - 5000 (DJI) range if not lower. Anyone thinking that the great bust is over is sadly mistaken.

[A HERETIC I AM]

9. What exactly is a "Vanguard-like account"?

Is the custodian of your IRA Vanguard or not?

Who is the custodian? Is it a full service brokerage, a Mutual Fund company (Vanguard) or what?

A traditional IRA at a full service broker would allow you to have the money invested in virtually any way you wanted, from CD's to Money Market funds to individual stocks to all manner of Mutual Funds.

Leave the money in the IRA account. Just re-allocate it in such a way that you are more comfortable. Just remember this; by the time you start to feel really comfortable investing in stocks again, you will have likely missed 20 to 30% of the upside. The time to buy stocks is when anxiety and fear is the highest.

[DCKit]

5. If you've taken a "hit" and not a "complete slam", you've probabably chosen the best investments.

Sounds to me like you're an investor who does due diligence.

However, I'd still take out some and buy rice, beans and powdered milk.

[Common Sense Party]

7. Absolutely not.

From your responses, you're a long way from retirement. Stay in stocks. In the long run, they'll do quite well, and you're reinvesting and buying shares while cheap. I'd be investing more in equities now if I had the cash. The volatility should last through most of next year, which is good news if you're systematically investing.

[2Design]

11. move ira to credit union where it is insured and earns interest in

a cd or money market that is fdic insured - then it is not cashed out but moved to a safer place - they can help you with the move

[exboyfil]

12. I moved 40% of my portfolio into TIPS about 1 1/2 month ago

Treasury Inflation Protected Securities. Both Vanguard and Fidelity have secondary TIPS as well as the ability to actually bid on future TIPS auctions. I laddered maturity from about 2 years to 20 years and got a guaranteed real rate of return (even with deflation) of about 3%.

The bonds have increased in value since I purchased them as more money pours into the Treasury so I don't know if they would be as good a deal now.

Inflation protected bond funds exist at both Vanguard and Fidelity that also may be an option.

I would like to argue that it may not be the best time to cash out of equities, but my crystal ball is not that good. After yesterday's bump I took 10% of my portfolio out of equities thinking that we are going to continue to see this rise and retreat pattern. I don't like day trading, and I would prefer to dollar cost average and hold with occasional rebalancing, but the equity market is seriously sick. We may see some good gains if the market overcorrected, but can anyone really argue that it has??? How many more shoes are waiting to drop out there. The so called 7-8% real rate of return in equities are a thing of the past in my opinion. I think retirement funds have too much money chasing too few viable investment opportunities. I bet 5% real rate of return going forward will be the best that we can expect given the maturity of our economy.

We may be entering a deflationary cycle, but considering how much money the Fed is spending, I expect to see high inflation on the other side.

[sarcasmo]

13. Will the amount in your IRA pay off your house and other debt? Then if so I would go that route.

I am a paying down debt guy, no one can take your house if it's paid in full.