Roth ira investments in savings account each month?

[meleana]

Been investing in IRAs for years. Now turning 60 soon. Husband turning 62. Have a lot of investments in IRA mutual funds.

With the economy and market the way it is, should we switch our monthly contributions to a Roth cash savings account or continue investing in the market in our Roth each month?

I would leave the current investments as is- stock and bond funds, etc. This is just for future contributions going forward.

Thinking it would help me sleep better at night.

I might add we do have about 3 years cash expenses savings for emergencies in a regular savings account. But thinking with all the uncertainty out there and getting close to our retirement ages, when we will want to relocate and so on, maybe better to have 5 years.

 

[REWahoo]

Sounds like you don't really have a defined asset allocation goal. I'd start there first, and then the answer to your question would be easy to determine.

 

[meleana]

Sounds like you don't really have a defined asset allocation goal. I'd start there first, and then the answer to your question would be easy to determine.

I am not sure how to determine that. I know all about the different formulas and so on to determine if you should have a 60/40 or a 50/50 and so on.

I tend to be conservative. Right now I have something like a 38% stocks/38% bonds/24 % cash. Wasn't predetermined cause I am not sure what it "should" be. Just invested and it wound up like this.

I am right brained - to me it's all relative. I don't get bogged down in the small percentage changes. I do tend to not want to sell off anything as it affects returns also, especially because I am forced to once per year from my inherited IRA.

 

[REWahoo]

I tend to be conservative. Right now I have something like a 38% stocks/38% bonds/24 % cash. Wasn't predetermined cause I am not sure what it "should" be. Just invested and it wound up like this.

Since you have no AA goal, then I don't really think anyone can answer your question other than you. Put your added funds wherever you feel the most comfortable - in cash if that makes you sleep better.

 

[steelyman]

I think the most important thing is that you're making those contributions. You have plenty of time to do what you like with them later on, nothing is set in stone except the time period allowed for each year's contributions.

 

[Whisper66]

Each of us sets an asset allocation that we are comfortable with. Typically doesn't change too much with market fluctuations (for most of us at least). 34% bonds and 24% cash is on the high side in my opinion and with my comfort level. My personal target is a minimum of 3 years available funds in bonds + cash (total of both). Maximum total for both is 30% of total portfolio in bonds + cash. This is of course just one person's example based on my comfort level which is partly based on an expectation that most markets turn around in a couple years...at least to the point that I wouldn't mind selling some equities then.

Your situation and comfort levels may be much different. You and DH just need to think about it and pick a strategy you are ok with. You'll find lots of helpful opinions here on the board if you outline a chosen strategy and why you feel it works for you.

 

[meleana]

Since you have no AA goal, then I don't really think anyone can answer your question other than you. Put your added funds wherever you feel the most comfortable - in cash if that makes you sleep better.

''

Well, that is what I do not know how to determine. How does anyone know what asset allocation is right for them?

I keep hearing things like "Go cash" for 2016. Well, I am not about to sell off all my IRA holdings and put them into a money market or CDs! That seems crazy for several hundred thousand dollars that needs to last into my old age.

On the other hand, buying low is supposedly a good thing, but "they" are saying go cash. So then I thought maybe I should contribute to a Roth IRA savings account so at least the interest won't be taxed like in a regular savings account. Right now mine go into a blue chip growth fund and hubby's goes into an investment grade bond fund. (we both have diversified portfolios)

I have a paid off house and no debts.

Of course, I get nervous at times like this. UGH! My husband wants to take the cash every month and bury it in the backyard! LOL!

 

[Whisper66]

On the other hand, buying low is supposedly a good thing, but "they" are saying go cash. -- Not sure who "they" is but "go cash" is only good if (a) you need the cash immediately or (b) need it in the very short term or (c) are trying to time the market and feel you can buy better priced equities at a future time.

Since you have so much cash and bonds available, I don't see (a) or (b) as an issue for you. I personally am not a market timer so wouldn't recommend (c) for anyone who doesn't like gambling a bit.

 

[REWahoo]

Well, that is what I do not know how to determine. How does anyone know what asset allocation is right for them?

Good question.

It boils down to your risk tolerance (and it sounds like your husband's is lower than yours). This looks like it might be a good place to start in helping you determine your risk tolerance and deciding what AA will work best for you:

How to Find Your Perfect Asset Allocation

 

[meleana]

Each of us sets an asset allocation that we are comfortable with. Typically doesn't change too much with market fluctuations (for most of us at least). 34% bonds and 24% cash is on the high side in my opinion and with my comfort level. My personal target is a minimum of 3 years available funds in bonds + cash (total of both). Maximum total for both is 30% of total portfolio in bonds + cash. This is of course just one person's example based on my comfort level which is partly based on an expectation that most markets turn around in a couple years...at least to the point that I wouldn't mind selling some equities then.

Your situation and comfort levels may be much different. You and DH just need to think about it and pick a strategy you are ok with. You'll find lots of helpful opinions here on the board if you outline a chosen strategy and why you feel it works for you.

So I guess you are 70/30 and I am opposite at 38/62 for the most part- not far off from 40/60 which I think does reflect my comfort level. I might add this is all my money taken into consideration- not just IRA money. I look at the whole picture of all my money assets.

I'll have to think on this more. One thing I hate is when I am investing money every month and my statements show less money because of the market downturns. (Who does?)

 

[Whisper66]

Some guidance on asset allocation strategy from our friends at Boggleheads
https://www.bogleheads.org/wiki/Asset_allocation

 

[Whisper66]

So I guess you are 70/30 .....

Just to complete the data point, I'm currently 85/15 because I sold bonds and bought low price stocks and stock funds during the August 2015 correction. This ratio is for my entire portfolio and includes an expectation of 1-2 yrs of a market downturn in 2016/2017. I'm ok with the downturns cause they offer a chance to buy low priced equities. Again, just one person's data point and I don't mean to imply this may be good for you guys. FYI - I'm 55, married, no debt and just retired in March of last year.

 

[meleana]

Just to complete the data point, I'm currently 85/15 because I sold bonds and bought low price stocks and stock funds during the August 2015 correction. This ratio is for my entire portfolio and includes an expectation of 1-2 yrs of a market downturn in 2016/2017. I'm ok with the downturns cause they offer a chance to buy low priced equities. Again, just one person's data point and I don't mean to imply this may be good for you guys. FYI - I'm 55, married, no debt and just retired in March of last year.

55 and retired! Very nice! Jealous! We are trying to hang in there. I need to get more financial advice to see if we have to wait until full retirement age to retire. Big sticking point is health insurance otherwise we might have been able to retire sooner. I am already sending away for retirement community brochures to keep me thinking positive! LOL!

Your 85/15 we way too risky for me- that I do know!

 

[Independent]

''

Well, that is what I do not know how to determine. How does anyone know what asset allocation is right for them?

I keep hearing things like "Go cash" for 2016. Well, I am not about to sell off all my IRA holdings and put them into a money market or CDs! That seems crazy for several hundred thousand dollars that needs to last into my old age.

On the other hand, buying low is supposedly a good thing, but "they" are saying go cash. So then I thought maybe I should contribute to a Roth IRA savings account so at least the interest won't be taxed like in a regular savings account. Right now mine go into a blue chip growth fund and hubby's goes into an investment grade bond fund. (we both have diversified portfolios)

I have a paid off house and no debts.

Of course, I get nervous at times like this. UGH! My husband wants to take the cash every month and bury it in the backyard! LOL!

Regarding the bold, I'd suggest switching to a different channel.

The general opinion on this sub-forum is that it's too easy to be overly emotional about investments. People tend to buy what went up last year (because if feels good) and sell what went down last year (because you can't bear staying with your losers.

That's the exact opposite of "buy low, sell high". A fixed allocation goal means that when you re-balance you're forced to sell your winners and buy the losers. It doesn't matter a lot whether your AA is 60/40/0, or 50/40/10, or whatever. The gain comes from not imagining that you're better at timing the market than all the professionals who do this full time.

In particular, I have no idea whether stocks will outperform cash over the next 12 months. Presumably, the relative prices reflect the consensus opinion of the pros. I won't try to beat them, I'll just stick to my AA.

But, of course, this takes the conviction that "Fixed AA goals with scheduled re-balancing, works in the long run, even if it feels odd in the short run".

 

[Fedup]

Your husband still has a job and you have 3 years of living expense in cash then I wouldn't worry. Stay the course, buy it cheaper. When does he plan to retire?


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[Sunset]

Your AA sounds very conservative to probably most folks.

Since you are making monthly contributions, this is perfect for you in a declining market, as at some point it will level off, and rise. If you invest in cash only, then you will miss out on the rise, plus dividends.

When I was working I raised my contributions to stock in my 401K during declines in the market as everything was on sale, sure folks talked like 2008 times were 1928 so it seemed scary, but the rebound was wonderful. A lady at work converted all her 401K to interest/cash as it was too scary, and 2 years later after the rebound was still in cash, she had missed the rebound.

 

[meleana]

Your husband still has a job and you have 3 years of living expense in cash then I wouldn't worry. Stay the course, buy it cheaper. When does he plan to retire?


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He would love to retire yesterday, but he won't until age 66- will get Medicare and plans to hold off on taking SS until 70- but not set in stone.

 

[meleana]

Your AA sounds very conservative to probably most folks.

Since you are making monthly contributions, this is perfect for you in a declining market, as at some point it will level off, and rise. If you invest in cash only, then you will miss out on the rise, plus dividends.

When I was working I raised my contributions to stock in my 401K during declines in the market as everything was on sale, sure folks talked like 2008 times were 1928 so it seemed scary, but the rebound was wonderful. A lady at work converted all her 401K to interest/cash as it was too scary, and 2 years later after the rebound was still in cash, she had missed the rebound.

I am thinking maybe you are right. Will be scary for me but maybe we will just stay the course. Hard for me as we- like everyone else- have gone through several downturns and I get sick to my stomach.