Closed my Roth IRA due to political uncertainty - mistake???

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dexter74
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Closed my Roth IRA due to political uncertainty - mistake???

Post by dexter74 » Tue Feb 14, 2017 2:00 pm

I'm new to investing, 42 yrs old, self-employed, and opened a Roth last year. I'm pretty risk averse and had a Vanguard target retirement with a 60/40 AA. However, I'm very concerned [paranoid?] that the current political climate will eventually cause the market to tank, so I closed my account and stuck all my $$$ [15k] into my rewards checking acct that pays 2.65%, so at least I'm beating inflation [slightly] if nothing else. I can deal with the ups and downs of the market [somewhat] but am terrified about losing my principal.

My checking acct % is capped at 15k, so any other savings I'll probably stick in an online savings acct. I know this strategy is not designed for long term savings, but given my trepidation of the current white house administration, I made the move. I plan on reopening a Roth down the road, but probably not until 2020. My question is, did I make a big blunder? Am I being overly cautious? Thanks in advance.

livesoft
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by livesoft » Tue Feb 14, 2017 2:02 pm

Yes, you blundered. You could have just changed the investment(s) in your Roth IRA. For instance, you could have switched to using certificates of deposit aka CDs.
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Rupert
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Rupert » Tue Feb 14, 2017 2:07 pm

Yes, huge mistake. You should open a new Roth IRA and just invest more conservatively, in a bond fund or even a stable value or money market fund if that's what helps you sleep at night. But if you invest that conservatively for very long, you likely won't have enough money to retire. Think long term because this too shall pass.

dexter74
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by dexter74 » Tue Feb 14, 2017 2:08 pm

I considered that, as well as just leaving it in a money market, but both rates are low. Very low. Aren't I better off taking the 2.65% I get from my rewards checking acct?

livesoft
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by livesoft » Tue Feb 14, 2017 2:09 pm

Actually, if you closed the Roth IRA in the past 60 days, you still have a chance to re-open it or do a non-custodian "rollover" sometimes called an indirect rollover. This will undo your blunder.

Your 2.65% is taxed, but a 3% CD in a Roth IRA is not taxed.
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SleepKing
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by SleepKing » Tue Feb 14, 2017 2:23 pm

dexter74 wrote:My question is, did I make a big blunder? Am I being overly cautious?


Yes.
Yes.

I say this very objectively; it appears you did not fully evaluate your decision (i.e. why not change to total bond, CDs, money market, etc.,etc..)?

Perhaps you should develop a full financial plan prior to getting back in the market.

MI_bogle
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by MI_bogle » Tue Feb 14, 2017 2:29 pm

So... instead of investing more conservatively within your Roth, you withdrew all your roth money and closed the account?

orca91
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by orca91 » Tue Feb 14, 2017 2:30 pm

dexter74 wrote:I considered that, as well as just leaving it in a money market, but both rates are low. Very low. Aren't I better off taking the 2.65% I get from my rewards checking acct?


Compared to giving up that Roth space? I'd say, no not better off. Yes, that was a mistake to just close it out. As mentioned, you could have picked a short term bond fund or CD or something other than the fund it was in. But, at least it would still be in the Roth account.

You should have checked in with the forum about this BEFORE making the jump. I'm not familiar with it, but as livesoft said, you may be able to still get your Roth open and filled again. Look into that.

dexter74
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by dexter74 » Tue Feb 14, 2017 2:32 pm

Well it sounds like I may have messed up, though I closed it two weeks ago and have 60 days to re-open.

If I went with a conservative AA of 60/40 or even 50/50, what are the chances of losing principal due to a big crash in the market? Please bear with me as I'm VERY new to this and am obviously still getting my footing. And thanks again for the feedback/insight.

livesoft
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by livesoft » Tue Feb 14, 2017 2:35 pm

You could go with a conservative 0/100 allocation. You can change your allocation in a Roth at almost any time. Worry about that after you get your money back into a Roth IRA. And don't forget to add even more money to do with a 2017 contribution. :)
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Nate79
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Nate79 » Tue Feb 14, 2017 2:41 pm

What level of expenses do you expect to need to cover in retirement (minus SS/pensions)? Since you are not invested your ability to save for retirement will be entirely based on your savings rate. Putting money in savings account or CD's will have about a 0% real return. You might be able to save some money on taxes by using ibonds (tax deferred) and it will at least match inflation. But by not being invested in the stock market you need to save all your expenses for retirement.

Jack FFR1846
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Jack FFR1846 » Tue Feb 14, 2017 2:46 pm

dexter74 wrote:Well it sounds like I may have messed up, though I closed it two weeks ago and have 60 days to re-open.

If I went with a conservative AA of 60/40 or even 50/50, what are the chances of losing principal due to a big crash in the market? Please bear with me as I'm VERY new to this and am obviously still getting my footing. And thanks again for the feedback/insight.


Your view of conservative vs pulling all of your money out and putting it into a checking account really don't match. If you went 10/90, you'd be more aggressive than you presently are. Why not start by going 10/90, write an IPS and then stick to that IPS.

With all the hoops people jump through to do backdoor Roths, I can't see where giving up existing Roth space makes any sense whatsoever. Maybe look into one of the bonus-giving custodians (Fidelity, TDAmeritrade, Schwab) if you've got enough to qualify and open an account to collect the instant reward.
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orca91
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by orca91 » Tue Feb 14, 2017 2:47 pm

dexter74 wrote:If I went with a conservative AA of 60/40 or even 50/50, what are the chances of losing principal due to a big crash in the market?


Well, it's simple... if there was a big crash in the market, you would absolutely lose some principal. :happy The more conservative your AA, the less principal you would likely lose though.

The thing you have to determine is, how much you would be comfortable losing during a big crash.... and what you think the market will do long term, or after a big crash. Do you think it will go up over the long term, even after a big crash? Then the big crash shouldn't be a big concern for you. Do you think it will crash and never recover? Maybe you are not comfortable investing in the market then.

Taking a good look at your risk tolerance, and your need, willingness, and ability to take risk may be a good exercise for you at this time. The stock market doesn't always go up. There will be downturns. But, hopefully the overall line continues upwards, or we're all wasting our time and money investing in it.
Last edited by orca91 on Tue Feb 14, 2017 2:49 pm, edited 1 time in total.

dacalo
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by dacalo » Tue Feb 14, 2017 2:48 pm

I think I saw a post a while back that, with every passing year, the risk of having a negative return significantly reduces, especially after 15 years or so. Given that we are talking about Roth IRA, yes you made a mistake. I would assume that due to the nature of the account, you are not planning to withdraw this balance for a while.

To give you a different perspective, I am 37 years old and my Roth IRA is all equity (Vanguard Total Stock Market). I have over 20 years until I plan to withdraw from this account, so I just contribute and don't even worry about noise. I used to be individual stock investor but with BH method of low cost mutual funds, I sleep better at night knowing that I own the whole market.

KlangFool
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by KlangFool » Tue Feb 14, 2017 2:50 pm

OP,

Do you have an emergency fund? How big is your emergency fund? If you have none, you should be nervous. You should not invest with the money that you cannot afford to lose.

Now, if you have an emergency fund of 6 months or longer, why do you worry about losing your principal?

KlangFool

s0me0nesmind1
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by s0me0nesmind1 » Tue Feb 14, 2017 2:52 pm

Yes, very large mistake (as many here have already stated).

But let me just give you one important message that has helped keep me sane over the years: If at any time a diversified investment is going to fall and not come back up (e.g. stock market tanks, never to recover in the next couple years) then you will have a LOT worse things to worry about than your retirement funds. Such as staying alive, finding food to eat, etc...

Just something to think about instead of going crazy every time an abnormal political event occurs :wink:

mhalley
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by mhalley » Tue Feb 14, 2017 2:53 pm

To hopefully make this post not a political rant, let me say that OF COURSE the stock market will crash at some point. That is the nature of the markets. Here is a post from 2013 with a history of market declines.
http://thereformedbroker.com/2013/08/20 ... rrections/
A few of the salient points:
"Since the end of World War II (1945), there have been 27 corrections of 10% or more, versus only 12 full-blown bear markets (with losses of 20% +)."
"This equates to one correction roughly every 20 months"
"For those with time horizons longer than five years (most), the best thing to do is grit one’s teeth and do very little. If a correction of between 10 and 20% is unbearable to you mentally or financially, that means you’ve either got more money than you should invested in stocks or you’re kind of a fairy. Make the adjustment you can live with and remember this feeling the next time you find yourself chasing the market."
"As to the question of whether a correction could become a bear market (or worse even, a crash), the answer is that this is always possible. But most corrections do not become crashes, and every single one of them turned out to have been great buying opportunities in the fullness of time."
[OT comment removed by admin LadyGeek]

Crisium
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Crisium » Tue Feb 14, 2017 2:55 pm

Wellesley is a popular actively managed fund (several new threads recently on this 40 year old fund) that lost money in 2008, but less than stock heavy funds even though it is close to 40% stocks:
https://personal.vanguard.com/us/funds/ ... IntExt=INT

It's solid past run is absolutely no guarantee of how it will perform in the next crash, but it is something to consider. You could even cut it down more by mixing it with a short-term bond fund, if you want to be more conservative.

dexter74
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by dexter74 » Tue Feb 14, 2017 2:58 pm

KlangFool wrote:OP,

Do you have an emergency fund? How big is your emergency fund? If you have none, you should be nervous. You should not invest with the money that you cannot afford to lose.

Now, if you have an emergency fund of 6 months or longer, why do you worry about losing your principal?

KlangFool


I do have an emergency fund. Definitely enough for 6-9 months. I worry about losing principal because.... Hmmmm.... I don't really have a good answer. I guess losing some principal is just par for the course when having money in the market. It does seem that I acted hastily without really thinking it through. In order to keep my emer fund where I want, I'll only have a few grand to reopen the Roth with. Prior to closing it, I was considering the VBINX fund, but may start with a TR 2015 or 2020, just to be on the safe side since it's only 1k to get back into that.

CFM300
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by CFM300 » Tue Feb 14, 2017 3:00 pm

dexter74 wrote:Well it sounds like I may have messed up, though I closed it two weeks ago and have 60 days to re-open.

If I went with a conservative AA of 60/40 or even 50/50, what are the chances of losing principal due to a big crash in the market? Please bear with me as I'm VERY new to this and am obviously still getting my footing. And thanks again for the feedback/insight.

As others have advised, you should get the money back into a Roth ASAP. Invest it in whatever you feel comfortable with. As others have mentioned, you can change investments inside an IRA anytime without any tax consequences.

Your next step should be to learn more about investing. Begin by reading at one least one of the "Start-up books" listed here:
https://www.bogleheads.org/wiki/Books:_ ... nd_reviews

Since you're self-employed, you should also make sure that you understand your retirement account options.
http://www.obliviousinvestor.com/sep-vs ... solo-401k/

mhalley
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by mhalley » Tue Feb 14, 2017 3:17 pm

Vanguard has a nice little page about asset allocation, including a nice little slider that shows the yearly gains/losses of various asset allocations by using a slider. For example, if you put in a 50/50 allocation it shows a -22.4% drop in 1931, -15.74% in the crash of 74 and -16.07% loss in 2008. Note that the great depression was the only time there were 3 consecutive years of losses for a 50/50 portfolio, and there have only been 3 periods of 2 years of consecutive losses since 1926. For a 100% stock portfolio, only 1 period of 4 straight years of losses, one of 3 years, and 2 of 2 years.
https://personal.vanguard.com/us/insigh ... about-risk
Last edited by mhalley on Tue Feb 14, 2017 3:22 pm, edited 2 times in total.

mptfan
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by mptfan » Tue Feb 14, 2017 3:19 pm

dexter74 wrote:My question is, did I make a big blunder?

Yes.
dexter74 wrote: Am I being overly cautious?

Yes.
I eat risk for breakfast. :)

Stan Dup
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Stan Dup » Tue Feb 14, 2017 3:24 pm

"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti

malabargold
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by malabargold » Tue Feb 14, 2017 3:25 pm

Read the story about the guy who only invested at "market highs"
-right before big drops.

You say you are risk averse, but what about the risk of inflation?

Afty
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Afty » Tue Feb 14, 2017 3:28 pm

dexter74 wrote:I worry about losing principal because.... Hmmmm.... I don't really have a good answer. I guess losing some principal is just par for the course when having money in the market.

You should read about loss aversion. It's irrational, but we all do it. The key is to know that it exists and to be able to identify when you're falling prey to it.

Artisan
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Artisan » Tue Feb 14, 2017 3:31 pm

Unfortunately I have read all too many post like yours the past few months.

Making decisions based on what you think will happen based on political events is usually a bad decision.

Here we call the events "noise" and we learn to tune it out.

I said unfortunately in my first sentence because unless you are a high income earner who can save large amounts and not need the magic of compounding returns to increase your account balances you will be woefully unprepared when retirement time comes.

Yes there is risk in investing. Most people need to take some risk. Withdrawing dollars from an account based on what may or may not happen is fortune telling. You said you plan to wait until 2020. What if the political climate is the same? Going to wait until 2024?

I would strongly suggest you read the wiki, read some basic books on investing (Any of John Bogle's are good ones) create an investment policy statement and follow it. This will allow you to sleep at night and reap better returns in the long term.
Last edited by Artisan on Tue Feb 14, 2017 3:35 pm, edited 1 time in total.

wolf359
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by wolf359 » Tue Feb 14, 2017 3:34 pm

dexter74 wrote:If I went with a conservative AA of 60/40 or even 50/50, what are the chances of losing principal due to a big crash in the market? Please bear with me as I'm VERY new to this and am obviously still getting my footing. And thanks again for the feedback/insight.


Let's say that the market drops by 50% like it did in 2008. Let's say you have $5,500 invested at 50/50. That means $2,250 in stocks, and $2,250 in bonds.

Your stock valuation would be cut in half, so it would be $1,125. Your bonds would stay stable (probably go up a little) at $2,250.

So while you're watching a 50% drop in the stock market, your balance would be $3,375.

The good news is that you're not retiring tomorrow. You now have 30+ years for it to recover. The other good news is that if you had invested in something like Total Stock Market, the chances of the fund going to zero are very, very low. Basically, every publicly traded company in the US will have to go bankrupt. So you know that the fund will stick around, and it will eventually come back.

50/50 is a good asset allocation to start with, until you know what your true AA is. You find that out by going through a crash and seeing how well you sleep.

Good Listener
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Good Listener » Tue Feb 14, 2017 3:34 pm

Although you made an error there is a lot of good to come out of it. You have now demonstrated to yourself that you have essentially no tolerance for risk assets. That is good to know. I think if I had that riisk tolerance I would limit myself to money markets, savings account pints, CDs, fixed annuities and individual bonds. Otherwise you will buy in near highs and sell near lows.

onourway
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by onourway » Tue Feb 14, 2017 3:42 pm

dexter74 wrote:I do have an emergency fund. Definitely enough for 6-9 months. I worry about losing principal because.... Hmmmm.... I don't really have a good answer. I guess losing some principal is just par for the course when having money in the market. It does seem that I acted hastily without really thinking it through. In order to keep my emer fund where I want, I'll only have a few grand to reopen the Roth with. Prior to closing it, I was considering the VBINX fund, but may start with a TR 2015 or 2020, just to be on the safe side since it's only 1k to get back into that.


With 6-9 months of emergency fund, consider fully funding your Roth anyways. This reserves your Roth space which is limited, and the contributions can be withdrawn at any time without penalty - allowing it to act as an extension of your EF which hopefully you won't need. As you will be conservative with your investments you don't have to worry much about it not being there if you need it. Then replenish your emergency fund over the next few months/year.
Last edited by onourway on Tue Feb 14, 2017 3:42 pm, edited 1 time in total.

aristotelian
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by aristotelian » Tue Feb 14, 2017 3:42 pm

There are two questions here. One is whether it was a mistake to close your IRA. The answer is definitely yes. You are missing out on tax free gains.

The second is how you can reduce risk. You can still invest conservatively while keeping your money growing tax free. The options would depend on your mutual fund provider.

dexter74
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by dexter74 » Tue Feb 14, 2017 3:48 pm

Good Listener wrote:Although you made an error there is a lot of good to come out of it. You have now demonstrated to yourself that you have essentially no tolerance for risk assets. That is good to know. I think if I had that riisk tolerance I would limit myself to money markets, savings account pints, CDs, fixed annuities and individual bonds. Otherwise you will buy in near highs and sell near lows.


I'll chalk it up to ignorance more than "zero risk tolerance" ; )

I did a fair amount of research and risk tolerance tests before I opened my Roth, and although I lean more towards the "cautious" side by nature, I do know there is really no way to earn decent returns without some level of risk. I'm barely middle-class and will stay that way until retirement, so I definitely will need the magic of compounding returns to get what I'll need for retirement.

This thread has helped me a lot and I will be reopening my Roth - just not sure how I'll pick the investments. Again, thank you all who chimed in. Your insight is GREATLY appreciated.

TomCat96
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by TomCat96 » Tue Feb 14, 2017 3:54 pm

dexter74 wrote:I'm new to investing, 42 yrs old, self-employed, and opened a Roth last year. I'm pretty risk averse and had a Vanguard target retirement with a 60/40 AA. However, I'm very concerned [paranoid?] that the current political climate will eventually cause the market to tank, so I closed my account and stuck all my $$$ [15k] into my rewards checking acct that pays 2.65%, so at least I'm beating inflation [slightly] if nothing else. I can deal with the ups and downs of the market [somewhat] but am terrified about losing my principal.

My checking acct % is capped at 15k, so any other savings I'll probably stick in an online savings acct. I know this strategy is not designed for long term savings, but given my trepidation of the current white house administration, I made the move. I plan on reopening a Roth down the road, but probably not until 2020. My question is, did I make a big blunder? Am I being overly cautious? Thanks in advance.


This is kind of the textbook example of when not to sell. The source of your selling was paranoia, justified by an ambiguous judgment call on the political climate. If you allow your "trepidation of the current white house administration" to rule your investment decisions, it means your financial decision making is based on your gut.

When I read your words this is what stuck out to me:
-paranoid
-concerned
-terrified about losing principal
-trepidation

Find yourself an asset allocation that let's you sleep at night, regardless of what goes on in the world.

Wakefield1
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Wakefield1 » Tue Feb 14, 2017 4:17 pm

KlangFool wrote:OP,

Do you have an emergency fund? How big is your emergency fund? If you have none, you should be nervous. You should not invest with the money that you cannot afford to lose.

Now, if you have an emergency fund of 6 months or longer, why do you worry about losing your principal?

KlangFool

Curious as to whether O.P. has any kind of non-Roth or 457 or taxable investments (sounds like not)
I believe there is a quotation of Mr. Bogle (or a favorite quotation of his) about it being necessary to invest because it increases the chance of retaining the purchasing power of your present Dollars?
Wonder if O.P. is covered by any kind of traditional Pensions promised if continued employment by present employer?

Thinking about another response I see above I believe Mr. Bogle told me personally something to the effect that there is absolutely no such thing as absolute zero risk in anything. Including doing nothing.

Rupert
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by Rupert » Tue Feb 14, 2017 4:56 pm

So, at 42, you're probably 20-30 years away from retirement, right? That's a loooooong time to recover from any losses that we may experience in the next 4-8 years. And, remember, while your principal may decline from time to time, you haven't really "lost" anything until you need the money and begin withdrawing from the account, i.e., you don't "realize" those losses when they happen.

groovy9
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by groovy9 » Tue Feb 14, 2017 7:11 pm

dexter74 wrote:My question is, did I make a big blunder? Am I being overly cautious? Thanks in advance.

Step one is to reopen your Roth if you're within the 60-day window. You took a tax hit for no reason.
Step two is to read up on how asset allocations work to balance average earnings with potential losses in the event of a bear market. You can do considerably better than your rewards checking without risking a drop of even 10% if something like 2008 were to happen again next year.

You panicked. Time to learn how not to panic again.

tibbitts
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Re: Closed my Roth IRA due to political uncertainty - mistake???

Post by tibbitts » Tue Feb 14, 2017 7:33 pm

dexter74 wrote:I'm new to investing, 42 yrs old, self-employed, and opened a Roth last year. I'm pretty risk averse and had a Vanguard target retirement with a 60/40 AA. However, I'm very concerned [paranoid?] that the current political climate will eventually cause the market to tank, so I closed my account and stuck all my $$$ [15k] into my rewards checking acct that pays 2.65%, so at least I'm beating inflation [slightly] if nothing else. I can deal with the ups and downs of the market [somewhat] but am terrified about losing my principal.

My checking acct % is capped at 15k, so any other savings I'll probably stick in an online savings acct. I know this strategy is not designed for long term savings, but given my trepidation of the current white house administration, I made the move. I plan on reopening a Roth down the road, but probably not until 2020. My question is, did I make a big blunder? Am I being overly cautious? Thanks in advance.

It's simple: you've learned that you should invest only in fixed income securities. But you had no reason to close your IRA and since you can still undo that, you should. But, no equities for life for you. There have been so many more dramatic events that have occurred than whatever you imagine is happening now, and what you really need to worry about is how you'd react to an actually significant event.

dexter74
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Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 1:23 pm

[Thread merged into here, see below (next page). --admin LadyGeek]

Hi All,

I recently closed my Roth after deciding the current political climate would bring uncertainty and inevitably cause the end of civilization as we know it. Soooo.... ummmm.... after getting some advice from the good people here, I realized I made a huge blunder, civilization will not be ending, and I need to reopen my Roth.

SO.... Of the many things I learned from my snafu, is that I'm a bit risk averse. More than I thought even. I'm considering a TRF 2015. Current AA is 45/55, so I think I can live w/ that. Many suggested I go even more conservative, given my lack of risk tolerance, but I still have 20-25 yrs before retirement and an emergency fund of 6 months, so I'm willing to take on a bit of risk, knowing I'll need to to get a proper level of return.

I'm obviously very new to investing and feel quite foolish with my decision to close my IRA. Thankfully I can and will be reopening it. Later this yr I'll be up to $3000 to get into other funds if I decide. Currently considering Wellesley due to it's strong showing in 2008 and modest AA. Does 2015 TR for now and eventual move to Wellesley sound look a good plan? Thanks in advance!

livesoft
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Re: Reopening Roth after a panic move - need advice on investment

Post by livesoft » Wed Feb 15, 2017 1:25 pm

2015 TR sounds good. Remember that when you put the money in it is NOT a contribution, but a rollover, so be sure to click the right things to make sure the financial institution knows it is a rollover.
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dexter74
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Re: Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 1:28 pm

livesoft wrote:2015 TR sounds good. Remember that when you put the money in it is NOT a contribution, but a rollover, so be sure to click the right things to make sure the financial institution knows it is a rollover.


Ahh. Gotcha. Thank you.

mhalley
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Re: Reopening Roth after a panic move - need advice on investment

Post by mhalley » Wed Feb 15, 2017 1:36 pm

The problem with tr 2015 is that it will get even more conservative with time. In 7 years from 2015 it will be 30/70. You could move the funds to a different tr fund every few years to maintain the 45/55allocation, but perhaps a better solution would be a combo of a lifestrategy fund and a bond fund to achieve the 45/55 split. This thread discusses a 50/50 split.
Previous thread viewtopic.php?t=107344

aristotelian
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Re: Reopening Roth after a panic move - need advice on investment

Post by aristotelian » Wed Feb 15, 2017 1:45 pm

Why not just go with Wellesley if that is what you want?

dexter74
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Re: Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 1:50 pm

aristotelian wrote:Why not just go with Wellesley if that is what you want?


Won't have the 3k to get into it for a few months. TR only take 1k to open.

integritetus
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Re: Reopening Roth after a panic move - need advice on investment

Post by integritetus » Wed Feb 15, 2017 2:20 pm

2015 Target Retirement, with a $1K minimum and a current 50/50 stock/bond allocation, sounds like a fine plan until you have enough to meet the $3K minimums of the alternative balanced funds. And until you decide upon your longer term strategy. As mentioned, this fund will get more conservative over time (i.e., shift more into bonds and less into stocks).

Wellesley, at a 33/67 stock/bond allocation, seems like it might be a bit conservative for a 20-25 year accumulation period but only you can decide that. More time and experience as an investor will help you decide.

You might consider the LifeStrategy balanced funds. LifeStrategy Conservative Growth is 40/60 stock/bond. LifeStrategy Moderate Growth is 60/40 stock/bond. Half of your portfolio in each would give you 50/50 stock/bond mix.

One other thing to keep in mind is that as you are accumulating over the next couple of decades, market downturns mean that stocks are on sale. Your periodic investments buy more shares when the market is down, and your reinvested dividends buy more shares when the market is down.

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Epsilon Delta
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Re: Reopening Roth after a panic move - need advice on investment

Post by Epsilon Delta » Wed Feb 15, 2017 2:30 pm

TR 2015 sounds pretty good. Something else may be better, but not a lot better. Many things are worse, some are a lot worse.

Remember the 60 day clock is ticking, so go with pretty good and get it done.

jf89
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Re: Reopening Roth after a panic move - need advice on investment

Post by jf89 » Wed Feb 15, 2017 2:57 pm

livesoft wrote:2015 TR sounds good. Remember that when you put the money in it is NOT a contribution, but a rollover, so be sure to click the right things to make sure the financial institution knows it is a rollover.


I just briefly read through the previous thread, because (to me) the rollover is the bigger deal here. Just make sure you get this rollover process started well before the 60 days is up, like yesterday. Paperwork and rollovers can take time. If there's a problem that pushes you past the 60 day limit, you're SOL.
"Save as much as you can, diversify diversify diversify, and you can't go wrong with tech stocks" | -First investing advice I recall from my parents in the 90's (two outta three ain't bad)

dexter74
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Re: Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 3:14 pm

Just got off the horn w/ Vanguard. All set. This wasn't/isn't employer sponsored, so it's going in as a contribution. I went with TRF 2015 for now.

Thanks again for all the input.

Whakamole
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Re: Reopening Roth after a panic move - need advice on investment

Post by Whakamole » Wed Feb 15, 2017 3:18 pm

You are 43 (from your post history) and 20+ years from retirement. TD 2015 seems a bit conservative. I understand you are risk averse, but there is another risk you need to think about: not having enough money in retirement because you were overly conservative in your investment choices.

Target Date 2025 is 65% stocks/35% bonds, with a hefty dose of international (an asset that has not done well lately, and so has higher expected, though not guaranteed, returns.) Perhaps dip your toes in equity a bit more?

====

And I'm not sure what you mean by "wasn't/isn't employee sponsored." Was this a Roth IRA or a Roth 401k?

dexter74
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Re: Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 3:29 pm

A prior poster mentioned that I needed to inform Vanguard I was rolling over - but they asked me if it was employer sponsored [it's not] so they said since it's new money/new acct, it's not a rollover.

As far as taking on a bit more risk, I may do that down the road. I had 2025 TR prior to closing it, which was around 60/40 AA. I know many may view that a bot conservative, too but I'm pretty risk averse and that's about the max risk I'm comfortable taking on. I'm leaning towards wellesley later this yr. And then set it and forget it. Seems to be a good one for a nervous Nellie like me :wink:

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Epsilon Delta
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Re: Reopening Roth after a panic move - need advice on investment

Post by Epsilon Delta » Wed Feb 15, 2017 3:30 pm

dexter74 wrote:Just got off the horn w/ Vanguard. All set. This wasn't/isn't employer sponsored, so it's going in as a contribution. I went with TRF 2015 for now.

Thanks again for all the input.


This is wrong. If it came out of an IRA of any type (and wasn't a RMD) it's rollover eligible.
If you don't intend to contribute up to the limit for 2016/17 it may not matter but if you do it does.

dexter74
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Re: Reopening Roth after a panic move - need advice on investment

Post by dexter74 » Wed Feb 15, 2017 3:36 pm

Epsilon Delta wrote:
dexter74 wrote:Just got off the horn w/ Vanguard. All set. This wasn't/isn't employer sponsored, so it's going in as a contribution. I went with TRF 2015 for now.

Thanks again for all the input.


This is wrong. If it came out of an IRA of any type (and wasn't a RMD) it's rollover eligible.
If you don't intend to contribute up to the limit for 2016/17 it may not matter but if you do it does.


I just did what the vanguard rep said. He assured me since I closed my old account, I'd be opening a new one with "new money" and I wasn't rolling anything over.

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