Tough Times For Your IRA

Something that I am learning the hard way is that patience is a very good quality to have when investing your money long term. Specially when it comes into checking your IRA for gains/losses. At first, I remember checking almost daily how my Roth IRA was doing. Trust me, you don’t want to be doing this. Specially with the down turn cycle that our economy is in right now, you can worry yourself silly.

Now, I try to look at my investments at a quarterly basis. But even then, it is still tough seeing your investments sometimes not doing so well, and even loosing money. Just remember that the market is cyclical. So sooner or later, the upswing will begin and your investments will most likely begin to record profits. The good thing about having an IRA during tough times in the market, is that it is a way to “bargain shop” for stocks. But a question that I always had was what if you are nearing retirement and the economy is not doing good?

CNN Money blog has a great post where Walter Updergrave answers this question. Here are some of the advice he gives:

The worst things you can do to your IRA is cashing it out. The taxes you would have to pay would be tremendous so this option should rarely be done. If you did, you would still need to re-invest. This time, you will have much less money and you will no longer have the tax-deferred compound gains you might generate.

If you have been using a long term investing strategy, stick to it. That means that you have a well balanced portfolio. At this point of your investing life, your strategy probably has shifted to one with much less risk to prevent a large portion of your investments to be loss right before retirement.

If you don’t have a long term investing strategy, create one now. It is not a good idea to have a collection of holdings that can help you when the market is doing good, but can really hurt you during rougher time. figure out your goals and come up with a strategy that will protect your investments, and provide you with a constant income during retirement. Your allocation will most likely consist of less stocks than before and more bonds to accommodate risk and return

If you don’t feel comfortable creating an investing strategy, choose a target-retirement fund. These are funds that are adjusted according to a persons age, retirement year, and risk tolerance. You simply choose the one that corresponds to you and you get the right mix of stocks/bonds that will fit your situation.

Short term losses are bound to occur no matter what. But if you plan ahead, you can prevent a lot of headaches in the future.


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