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Thread: IRAs

  1. #26
    Banned Katrine's Avatar
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    Default Re: IRAs

    Quote Originally Posted by Bridgette View Post
    I always think how HARD I work for my money so I can't stand the thought of losing it
    You don't have to lose it if you diversify! Conversely, think about the impact of inflation on your money over the long-term. I found a nice online calculator:
    http://www.tdbanknorth.com/investmen...inflation.html

    Inflation has averaged at 4.73% since I was born. What does the average CD return, about 5-6%?

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    Default Re: IRAs

    [quote=Bridgette;997920]
    I just don't know which are better investments and am super risk-averse so it's hard for me to put my money into anything that doesn't have a guaranteed return.
    One thing that you will have to conclude in due time is that no matter how risk-adverse you are, that there is no avoiding risk. When you're settling for 4-6% on an investment with no risk to principal when it could have been getting 10-20% in the stock market, you're still taking risk. Inflation is wittling away that savings account/CD interest down to near nothing as we speak.

    Probably a question you need to ask yourself is how far down the road you're going to need the invested money. If thats a long time horizon (say 10+ years), there's really no reason not to put some of it into a stock fund. You don't have to stick it all in one basket, or all in at the same time.

    Quote Originally Posted by Katrine View Post
    I've never seen a target date fund that I like. They are waaaaaaaaay to conservative from the get-go and have been drawing out industry criticism.
    That was actually my criticism about some of the non-adjusting hybrid funds that I've seen. Out of curiosity, what do you think is a proper stock/bond allocation for someone 30-35 years from retirement, assuming a middle of the road risk tolerance? My TD fund is running about 90/10 right now.
    Former SCJ now in rehab.

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    Banned Melonie's Avatar
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    Default Re: IRAs

    Inflation has averaged at 4.73% since I was born. What does the average CD return, about 5-6%?
    Yes, but only prior to tax on the CD interest earnings. If you fall into a 25% plus tax bracket, your net CD interest earnings may not be keeping up with inflation since said interest earnings are taxed at the same rate as wages or sole proprietor business earnings. This means that your actual effective interest rate on those CD's is only 75% of the pre-tax interest rate.

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