I'm Sooooo Confused! We Have An IRA With Morgan Stanley....

[ChiciB1]

I have been researching and checking for weeks now and STILL don't know what to do! I want to pull most of our money out and put it in CD's but CAN'T get my husband to understand this.

We lost a LOT of money in 3/2001 right after the start of Iraq and I'm scared to death now. Most of our money is tied to Mutuals.... Natural Resource Develop B, Pioneer Global High Yield and Real Estate Fund B... approximately 75%. About 20% in Stocks/Bonds H&Q Health Care, Liberty Allstar Equity, USA Fund.

Last month I pleaded with my husband to move on this but he doesn't seem to feel it's necessary, but since all the upheaval has blown up in ME and considering just how BAD Iraq is getting, does anyone here agree with me about "refining" this IRA. Since the IRA was a 401K rolled over when he retired, I'm unable to move the money myself because it was through his retirement fund. It's tax-deferred so taxes have to paid when money is withdrawn. I'm on the account and the beneficiary and he's given me authority to speak with the broker because I handle all our financial transactions, but I can't sign to withdraw finances.

I talked about this before and got a lot of input from many of you, but I'm no financial wizard and my husband has no clue. I was the one who urged him to set up the 401K a long time ago as he simply never involved himself in our financial goings on. As long as the bills got paid he showed no interest. All he ever want to know is "what's the balance" today? I don't feel comfortable with our broker so I'm not going there. Perhaps the broker is doing a good job, I just don't know. What I do know is that he usually tells us to refinance our home as opposed to removing funds. We only have 8.5 years to pay on our home and I don't think that's a good idea. We do have some acreage as a back-up, but it's not selling right now and I would rather just hold onto it for now.

I'm beginning to lose sleep over this and am getting very worried. Is there something I can SHOW my husband so he will understand my anxiety??? Or am I being too irrational?

[CountAllVotes]

1. show him this ...

http://finance.yahoo.com/q/bc?s=%5EDJI&t=my

Show him this simple chart. The DOW has barely moved at all since 1999. Profits? What profits?

I'd get out in a minute and put it into CDs if you can convince him to do it. At least you'll be safe and not sorry. 5% X 8 year = 40% interest - not a big fat zero!

Maybe this will help I hope.

:kick:

[Callalily]

2. Be very careful

about "pulling out" of your IRA. I'm not quite sure that you mean by that term, but there are tremendous penalties incurred when "pulling out". Now, there's nothing wrong with moving your investment, but you must stay within the IRA guidelines (penalty thingie you know). See a financial adviser. Many will give you the first visit at no fee. That person can A. Assure you that your IRA is currently in the right place, or B. Give you sound investment advice.

My two cents worth.

[CountAllVotes]

3. yes you are right ...

He needs a DIRECT rollover or must move the funds back into and IRA within 60 days. That will generate IRS paperwork (no penalties though). I'd check with the IRS if you plan to do this just to be sure.

:kick:

[checkmate1947]

4. If it is an IRA

leave it alone,,and it also has to do with your age, if you are over 50 pull it,, if you are under 50 leave it

[CountAllVotes]

5. the age is 59-1/2

to withdraw money without penalties, not 50.

As I stated before, call the IRS and ask them your questions after you get him to agree to move the money.

If he doesn't agree, there is nothing YOU can do being it is not your IRA.

Furthermore, forget the damn financial adviser IMO. They'll probably try to sell you some other fund I bet.

Just call the IRS and ask for the IRA department. They can properly advise and they do not charge for it either.

[enough]

6. OK, this thread is giving me the courage to ask a question --

I have recently become POA for my aged father who has taken a sudden decline mentally -- according to several doctors, he is no longer competent to take care of his affairs.

Therefore, I am suddenly having to think about investments, the market, etc. Which I have never given a thought to because I have never had enough extra money to do anything with (except for some real estate).

SO: Here is what I do not understand. As poster #1 says, the "market" has not risen appreciably since 1999. However, my father's investments (almost all in mutual funds) have grown significantly during that time. That is apparently because he has been receiving interest and dividends, which he automatically reinvests. He is frugal to the point of miserliness, and he never spends money.

1) I am still confused about the relationship of the "market" (ie, the Dow number), to the profitability of the investment.

2) To repeat the original poster's question -- given the volatility of the world and the possible collapse of the market, should this money be taken out of the mutual funds and put somewhere else -- and if so, where?

Everyone tells me to talk to a financial adviser, but I have no idea how to find a good (honest) one.

[CountAllVotes]

7. if you have POA over your father be very careful!!

and stay the HELL AWAY FROM LAWYERS! PM me for more info.

:kick:

[ChiciB1]

11. Oh My... I Didn't Think About That! We Are Currently Taking Care

of my husband's mother, but she doesn't have any money. She does however still have her home which is being maintained by her SS check. She'll soon be 94 and she has advanced Alzheimer's. We have POA already, but she has a Living Trust and her property will be divided between my husband and his brother. His brother does NOT want to keep her place when she passes, but my husband does. We will have to buy him out. YUCK!

Even though she's of advanced age and with Alzheimer's, we've had her living with us for 7 years and she takes no medication, she's just not here mentally. Other than than, she's fine, could live to be 100. I see that I will have to contact an adviser myself about this too. Glad you asked your question!

Head-ache #88!

[Crabby Appleton]

8. You probably have access to a "stable value fund"

within your IRA or that can be added to it and will avoid actually withdrawing funds from the IRA and triggering tax consequences and has CD like returns; your IRA may allow you to move money from a fund to a CD within the IRA, you'd have to check. I occasionally when concerned about a market downturn move money in my 401K to a Fidelity stable value fund in my 401K that year after year has a steady 4%-6% return and never goes down. 4%-6% isn't great but does beat the roller coaster ride that most stocks have provided over the last 5 years or so. I think the lowest return one year was 3.8%.

http://www.infoplease.com/finance/tips/money/moneyman_082599.html

has some info on these types of funds.

You might check with the broker/provider of the IRA to see what is available along this line if you are frightened.

Predicting the future, and how markets will react is damn near impossible but frequently your psychological makeup works against you in this area.

Good Luck

[ChiciB1]

9. Oh Thank You All So Much...

My husband is over 59.5, and I know about that extra tax penalty. For me, I would have to pay the penalty, but as I said it was generated in his name. What I don't know about is what kind of taxes will be incurred.

I think perhaps I will just call and see what the Broker says. So, what some of you are saying is that perhaps Morgan Stanley CAN put the money into a "safe" zone or even CDs. I will need to check this out ASAP.

Thanks so much for all the input. These are scary times and I know I get overly concerned on occasion, I just don't think I am this time around. Having other's giving me input bolsters MY argument somewhat and will be helpful in "pointing" this out to my husband. I don't feel like playing with money right now, I want security. The taxes on our land went sky-high and now that there seems to be a cooling down, I KNOW the taxes aren't going to go down, but I'll sit on the land before I will take a big loss. It's paid for even if they did "sock it to us" with triple the amount in taxes. In Florida, you can only have Homestead Exemption on your home, so the land falls into the "capital gains" category! And no, I'm NOT in any way wealthy... just made an investment back in 1989 and land values went way up. Now, they are tanking but I'm sure the taxes will be the same next year. I just need to keep enough money available to pay those taxes.

I did read a pamphlet from MS that the IRA was not secured by FDIC, but I need to know if ALL CD's are. I need to make some phone calls and meet with an adviser.

Thanks again... everyone here is so helpful!

[dave123williams]

10. Start buying Euros, and funds that hedge against inflation.

Have a piece of your portfolio set up that way, IMHO. When the housing bubble bursts here, you're really going to be happy you have that going on.

[ChiciB1]

12. It IS Bursting Already! IMHO

We put our acreage up for sale last January, right when things started to slump a little. We got many many calls during "season" here in Florida. Now rarely do we get a call. I realize I need a high end buyer, but I'll sit right now. This property is located in what was known as one of the fastest growing communities in Florida. North Port near Port Charlotte, FL.

Of course, people could be waiting to see how the Hurricane season is going to act, but I'm not thinking that's really what's going on.

We need some SERIOUS re-direction here in America!

[Danascot]

13. You have every reason to be concerned

From your brief summary, your husband is not being responsible with your financial future. He doesn't seem interested so tell him you're taking over and do it. You'll both be better off in the long run.

I'm not sure about Morgan Stanley but my retirement and investment accounts are with Schwab and I can sell and buy stocks, mutual funds, bonds, CDs and all kinds of other things. I can get "in" or "out" of anything I want, all within the existing accounts. MS may be similar.

My perception is that the stock market is cooling, the economy is cooling and interest rates are going up. Under these conditions, the recommendation is to move into "defensive" holdings such as consumer staples (as opposed to consumer discretionary), healthcare and utilities - things everyone still needs even when they are tightening their belts. There are mutual funds that specialize in these sectors individually or as a group. Large cap and blue chip companies also tend to be less volitile and thus safer in an uncertain market.

In term of proportions, a conservative mix would be 50% equities (stocks/mutual funds), 35% bonds and 15% cash (mostly money markets funds and CDs). The problem with buying bonds now is that rising interest rates causes them to lose value because their rates are fixed. Personally, I have less than 50% in equities, almost nothing in bonds and a lot in short term CD's (along with some gold holdings in case everything falls apart). I follow the market fairly closely but most people do not have the time, inclination or background to do so. And in fact it's usually a mistake to try to follow or time the market. If you check up on things every 6 or 12 months and make cautious adjustments based on the big trends, you'll do as well or better than most investors.

I think the stock market has begun a correction that may bottom out between 5% and 25% or more below current levels. Your post seems to indicate that your portfolio is close to 100% equities. If you don't want to ride the market down again you should move some of your money elsewhere.

- Natural Resources has had a good run and there may be some way yet to go, but then again it could be over.
- Global equities are likely to suffer if the US ecomomy falters, and it may be worse for them than it will be for us.
- Real Estate - I couldn't get out fast enough. The caution signs are the size of billboards.

Morgan Stanley should be able to provide an advisor that will give you a broad brush view of market conditions and make appropriate periodic recommendations of what to buy and sell. If you're stuck with the broker you don't trust find a reputable financial advisor locally whose fee does not depend on what and how much you buy and sell.

[ChiciB1]

14. Thank YOU for All This Information....

I do have my account on the Internet and check it all the time... because I'm "hinky." But I do strongly feel you are correct about real estate. I'm seeing it first hand in a THIS state which has a lot of newcomers all the time.

And I'm going to show my husband all the replies I've gotten so that he can see I'm not so "off the mark" with my intuition. One of the reasons I posted! Even though he doesn't take care of the finances, he still has a "man of the house" mentality. They used to call it chauvinism you know! Ha!

No matter, I may have to stomp my feet, but I'm going to make some changes. There are so many here who are so well informed and I certainly appreciate the help. Following the market or even financial investment is NOT my forte, I just want to keep what I have.

Thanks again. I bookmarked this too as my husband is out of town right now and will keep checking back.

[Danascot]

15. Here's a scary little scenario

You can find economic and financial opinion that reflect every possible viewpoint across the spectrum from bull to bear, optimist to pessimist. Here's one. I hope he's wrong but it's difficult to dismiss altogether.

Slower Growth will not Contain Inflation

As the U.S. economy contracts, the Federal budget deficit will grow and the perceived appeal of U.S. financial assets will be lost. As a result, foreign capital will flee at precisely the time it is needed the most. This will put additional upward pressure on interest rates, further increasing mortgage rates, suppressing real estate prices and consumer spending. More importantly, it will also cause the dollar to fall, making imports more expensive and pushing up raw material prices, thereby increasing production costs for domestic manufactures as well. As the dollar loses value relative to other currencies, foreigners will be able to outbid Americans for scarce consumer goods. As a result fewer products will be imported into the U.S. and more of America’s domestic production will be exported. Therefore, despite the fact that financially strapped Americans will be consuming much less, they will be paying much higher prices for the privilege of doing so.

http://www.kitco.com/ind/Schiff/jul212006.html

[ChiciB1]

16. I Sort Of Find the Scenario "Believable" Given The Current

"global economy" situation. And it IS scary, and at times I simply think I should take any money I have and put it under a mattress... to coin a phrase. At least I KNOW where the money is!

And this is also one of my reasons for being soooooo confused! What do we really do? Corporate Power seems to be all prevailing. I just feel so UNSAFE!

In today's climate it makes The Idiot and his corporate hacks look even more deranged regarding their Social Security wishes of privatization because the common man most certainly doesn't have the time, and most don't follow financial trends that closely.

Too many don't have the time simply because they are too absorbed with making a living. I've seen too many people of late who are struggling just to put food on the table and I don't see that many people in power who give a rats ass! Sorry for being so blunt, but it is true.

[Danascot]

18. Housing Bubble

This site has a lot of troubling information, though it's not a bad idea to be informed.

http://thehousingbubbleblog.com/

[ChiciB1]

20. Gee, That Was A Cheery Little Message! NOT!!

And more reason for my worry. There is one strange thing though.... I didn't get yesterday's S&P numbers for 8/1/06 but did see that Dow & Nas was down, but my portfolio showed a slight gain. I know we're tied to the S&P more than the other 2 so maybe S&P was up.

I know... I can check it out easily... was doing some political work yesterday and a lot of running around. I will watch for today though. Regardless, I'm not a gambler and will be pushing my husband to make changes before it gets much worse.

My acreage is going to have to sit, this much I DO KNOW!! But those taxes are really HIGH!!

[Sammy Pepys]

17. How long until retirement?...n/t

....

[ChiciB1]

19. Just Checked This Post Again....

Basically retirement is here.... the 401K we had was rolled over into and IRA with Morgan Stanley.

Since my husband is a little older than me and he retired early at 57 we DID have to wait before we could have access to the money without penalty. Now some of the extra charges don't apply if we make a withdrawal. Still, the money was tax-deferred and taxes have to be paid if it's withdrawn. I'm not sure of what the percentage is if it's withdrawn by the broker and am still waiting for my husband to get back home. He's still out of town. I can't make any changes without him talking to the broker first.

[Sammy Pepys]

21. As a general piece of advice.....

If you're in retirement now, you shouldn't be invested too terribly heavy in stocks to begin with. And the stocks you do hold should mostly be the relatively safe ones like the GEs and Johson and Johnsons and stuff like that.

[ChiciB1]

22. I Listed In The Original Post A Synopsis Of What We Are Holding.

Not too much in stocks, but some changes need to be made. Real Estate especially.

[Sammy Pepys]

23. OK...

Most of our money is tied to Mutuals.... Natural Resource Develop B, Pioneer Global High Yield and Real Estate Fund B... approximately 75%. About 20% in Stocks/Bonds H&Q Health Care, Liberty Allstar Equity, USA Fund.

The bolded sound like they could be stock funds to me. If you're holding a real estate mutual fund, chances are it's holding a good deal of real estate-related stocks, unless it's a REIT. I can't tell from your description, but you did call it a mutual fund. It may hold both REITs and stocks.

The Natural Resource Develop B fund is more likely than not a stock fund.

I'm guessing the Pioneer Global High Yield is probably a bond fund. If it's high yield, that leads me to believe it may invest in lower credit quality issues, or junk bonds. That's not necessarily a bad thing, but if my inkling is correct you need to understand that those types of funds are a bit riskier than plain vanilla bond funds.

Liberty Allstar Equity is definitely a stock fund, as evidenced by the word "equity." Do you know what kind of stocks it holds?

I have no idea what the USA fund is, other than you said it holds stocks.

Just to recap, a mutual fund can invest in stocks, bonds, or a combination of both. If you are investing in a stock mutual fund, you are investing in stocks. "Mutual" simply describes the method you are using to invest in certain areas.

And if I were you, I'd definitely look into meeting with a financial advisor.

[ChiciB1]

26. Okay... Thanks A Lot....

I can't get a real "read" by the end of the day stock market report. Days when I think I'll make money I don't and visa-versa. My husband won't be home until Sunday, so Monday is D-Day!!

[LSK]

24. at the very least get out of the real estate funds

Move that money to a safer fund in the investment.

Look up the past performance of the funds and see how they did when the market went bad in 2000-2001 and put some money into the better funds from that time period.

Also please check out finance.yahoo.com where you can look at information on all funds including historical prices and current holdings.

[Sammy Pepys]

25. The only potentially bad thing about that is...

Those funds that held their own may have had a different manager or investment strategy in 2001 than they do now. The chances are pretty good that they're invested differently now than then as well, unless it's an index fund. You've just got to do some hard research before judging a fund based on its returns of five years ago....that's a long time in terms of investment.

[ChiciB1]

27. Oh, We Have Changed From Time To Time... Especially

after 9/11. And about 8 months ago, we asked our broker to get a little more "aggressive" so I'm SURE that's how we ended up with the real estate in our portfolio.

I do agree that this is one change the needs to be made. I'm just wondering if we should let some of it ride for a while or just do a complete turn around and slow it down as much as we can? A CD type of thing.

How fast is the economy slowing and how close are we to some sort of crash??? Would it be better to have money in a FDIC account for better assurance??? This would limit "making" money, but it would also limit "losing" money.

[Sammy Pepys]

30. You need to go to a financial advisor....

That are lots of external things like lifestyle requirements, income and numerous other factors that determine how and where you invest your money. A good CFA can look at those factors and instruct you about which way to go.

[ChiciB1]

28. Thanks Again.... n/t

[progree]

29. Don't withdraw from your IRA. Reinvest it or move it, but keep it in IRA

You don't want to withdraw from an IRA. You will pay taxes on what you withdraw from the IRA (assuming its a "Traditional" IRA which it probably is, having been rolled over into an IRA). Even if you are over 59 1/2, you will pay taxes on everything you withdraw from the IRA. If its a large amount of money you withdraw, it can kick you up into a higher tax bracket. You pay the regular income tax rate on the amount of your withdrawal (bad news).

(If you are under 59 1/2, you will additionally pay a 10% penalty).

YOU SHOULD NOT WITHDRAW FROM YOUR IRA AND PAY TAXES OR PENALTIES. What you probably want to do is REINVEST THE IRA in safer investments -- you can get CDs or buy intermediate term bond funds. I have both in an IRA account.

If you don't like this broker, than do a DIRECT ROLLOVER TO AN IRA WITH ANOTHER CUSTODIAN -- I strongly suggest Vanguard as they are the only mutual fund company owned soley by their investors and have the lowest expenses of any. Yes, you can buy FDIC-insured CDs through them.

Full disclosure: I am mostly invested in equity (stock) mutual funds. I do not believe in rushing out of equity investments every time there are scary headlines in the newspapers or a bozo in the White House. Rather, invest say 50% in equity INDEX funds AND LEAVE IT THERE -- VERY FEW PEOPLE SUCCESSFULLY TIME THE MARKET, ONLY EXPERTS HAVE A CHANCE IN HELL OF DOING IT. It is people who get out of the market when things are rough and who get into the market only when it is hot hot hot that do poorly. Stocks have returned something like over 11% per year average compounded since 1926. Most equity investors average far less because they leave the market when things are rough and get into the market after its gotten hot. (i.e. they sell low and buy high). I know this isn't very "progressive" advice.

Please, relax, take your time, think things through, read some articles or books on investing. And ignore the dang headlines!

There's hardly a year or 5-year period when there aren't 101 reasons to believe that the world and economy is headed for disaster. Yet the vast majority of "buy and hold" people have come out just fine over a 20 year and longer horizon.

Good luck,
Progree