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JayS
02-05-08, 08:28 PM
Ladies and gents,

Please pardon my inexperience. I've been reading iTulip for about a year, trying to educate myself as much as possible. And for the past 5 years I've been continually making maximum annual contributions to my Roth IRA. 2007 was a pretty unimpressive year for the two funds in my Roth (VGTSX and VTSMX).

I believe the US economy is tanking. Totally. And I think I'm prepared for that.

My thinking is that i should NOT stop maxing this out, regardless of how terrible that economy gets. Because I can never "go back" and make up a missed year's contributions.

What would you all do? Keep making contributions into what might be a sinking ship? Or pile the $4k/year or so into my other pile of cash? Unfortunately, vanguard's precious metals fund is closed to new investors.

I'm in my late twenties, have a secure job, and have only moderate mortgage debt.

"Retirement investing" doesn't seem to be a popular topic here. Lemme know if I should have posted this elsewhere.

Jay

sadsack
02-05-08, 08:56 PM
My 2 cents (or 0.01 cents, inflation adjusted) . . .

If you want to get into PM's, IRA's are permitted to invest in ETF's of this nature (GLD, SLV, CEF, etc.) - just set up a brokerage account.

Some links I dug up via GIS shotgun:

http://www.ehow.com/how_2075705_put-gold-ira.html <- simplistic explanation of PM restrictions on IRA's

http://www.fatwallet.com/t/52/802190/ <- how to acquire gold coins for an IRA

http://taxdeferredstrategist.com/category/gold-news/ <- a more comprehensive list of "alternative investments" for IRA's allowed under the tax code

WARNING: These are "shotgun GIS" links, and are most likely shill info; nevertheless, they might serve as a seed to more productive searches on your part.

In the meantime, if you can find a 100% US Treasury option (MM or TIPS, 0% CMO or CDO), this might give you some breathing space if you believe the SHTF scenario is upon us.

Also check out the "Door Number Two" thread for an interesting take on PM's other than gold ("Rare earth" metals, etc.)

Verrocchio
02-05-08, 10:25 PM
First, congratulations on the secure job, moderate mortgage debt, and five years of tax-free accrual in your Roth IRA! That's a great start.

You're right to raise this question, JayS, since IRAs, 401ks, 403bs, and the like are not no-brainers anymore, not since the uncertainty about the economy has become profound. In fact, there's a good deal of controversy about almost every aspect of tax-sheltered retirement investing. there has been a post or two on this in the last few months, notably this one (and there are probably others worth reading): http://itulip.com/forums/showthread.php?t=1661&highlight=retirement
<o>
</o><o>I've excerpted two of these. </o>
Post 1
c1ue wrote: There are only 2 ways these retirement accounts are worse than any other 'bin' holding securities:
1) If the accounts limit you from exercising your desired inflation protection strategy due to inability to hold funds in foreign currencies, trade options, or other equity exercises due to the accounts themselves
2) Limits on how much you can deploy (or more specifically, losses are much more difficult to make up via asset rebalancing)
<o></o>
Post 2
dbarberic wrote: Jim Puplava as mentioned several times on his weekly show that he seems to think that when things get really bad that the US government will pass legislation requiring the different retirement accounts to purchase zero coupon Federal government bonds as a way for the Federal government to get its hands on the retirement assets to bail itself out.

Seems to me that someone else posted in January with a question similar to your own, but my search didn't find that one.

zoog
02-06-08, 01:35 AM
First, congratulations on the secure job, moderate mortgage debt, and five years of tax-free accrual in your Roth IRA! That's a great start.

You're right to raise this question, JayS, since IRAs, 401ks, 403bs, and the like are not no-brainers anymore, not since the uncertainty about the economy has become profound. In fact, there's a good deal of controversy about almost every aspect of tax-sheltered retirement investing. there has been a post or two on this in the last few months, notably this one (and there are probably others worth reading): http://itulip.com/forums/showthread.php?t=1661&highlight=retirement
<o>
</o><o>I've excerpted two of these. </o>
Post 1
c1ue wrote: There are only 2 ways these retirement accounts are worse than any other 'bin' holding securities:
1) If the accounts limit you from exercising your desired inflation protection strategy due to inability to hold funds in foreign currencies, trade options, or other equity exercises due to the accounts themselves
2) Limits on how much you can deploy (or more specifically, losses are much more difficult to make up via asset rebalancing)
<o></o>
Post 2
dbarberic wrote: Jim Puplava as mentioned several times on his weekly show that he seems to think that when things get really bad that the US government will pass legislation requiring the different retirement accounts to purchase zero coupon Federal government bonds as a way for the Federal government to get its hands on the retirement assets to bail itself out.

Seems to me that someone else posted in January with a question similar to your own, but my search didn't find that one.

A couple other threads that may be relevant

Forced "prudent" choices in your 401K - QDIA (http://itulip.com/forums/showthread.php?p=20314)

Money "trapped" in 401k (http://itulip.com/forums/showthread.php?p=24537)

JayS
02-06-08, 10:33 AM
Thanks for the replies everyone, this gives me much to read.

I couldn't have expressed my concerns better than this quote:

IRAs, 401ks, 403bs, and the like are not no-brainers anymore, not since the uncertainty about the economy has become profound.

Is it foolish to continue buying Vanguard's VGTSX and VTSMX? ITulip Consensus seems to focus on PMs. But it seems like PMs have peaked and I missed the boat. I suppose PMs will always be ok, no matter the price, because of their inflation-fighting properties.

I guess the first question I need to answer is: do I believe the "SHTF scenario is upon us", and if so, do I put the index funds on hold and get into PMs immediately?

Thanks again everyone,
Jay

Tulpen
02-06-08, 12:18 PM
ITulip Consensus seems to focus on PMs.
That may be so but I think it is unwise to invest in gold (and silver) at this moment in time.

We are in the beginning of a recession and that means to me that all commodities will have a decreasing demand. Furthermore I think that too many people are buying gold with unreasonable expectations. Many think it is next to a sure thing that gold will go up and you even hear people thinking it will reach $2000 to $3000. This means to me that if gold starts to fall these expectations will crumble quickly and that all those folks will run for the exits depressing the value even further.

Jayhawk
02-06-08, 12:58 PM
I'm in the same boat as you...I'm late to this bandwagon and trying to sort through all the options. Unfortunately, I just bought a home in late 2006. Right now, all my money is sitting in Treasury Backed MM accounts as I try and formulate a strategy.

dbarberic
02-06-08, 01:15 PM
:
1) If the accounts limit you from exercising your desired inflation protection strategy due to inability to hold funds in foreign currencies,

What about foreign stock mutual funds? Is that a close enough proxy to foreign currencies?

dbarberic
02-06-08, 01:28 PM
I'm in the same boat as many of you. For both my wife and myself, very limited choices in the 401K.

Given what we believe (the iTulip ka-poom theory), I believe the obvious choice (but not the optimal) is the following:

-Eliminate all bonds from your holdings (10%+ real inflation has a way of eating you alive if you hold bonds. Jim Puplava calls bonds "certificates of confiscation"... by the government).
-Some kind of ratio split among large cap and international funds
-I believe that large cap growth/value will give you access to dividend income that will at least pay out even during market downturns, plus many of the large cap US companies will benefit from EJ's prediction of an alternative energy bubble (e.g. General Electric, DuPont, etc.).
-International funds will at least give you a proxy to foreign currency and a hedge against significant dollar only devaluation.
-I would advoid broad index funds (NASDAQ, DOW, etc), except for maybe the S&P. Again, assuming that the S&P is at least a bit more narrow to get you access to large cap stocks and provided your retirement account does not have a large cap fund with a narrower focus (see point above).

Does anyone else have any better suggestions?

Andreuccio
02-06-08, 01:40 PM
Ladies and gents,

Please pardon my inexperience. I've been reading iTulip for about a year, trying to educate myself as much as possible. And for the past 5 years I've been continually making maximum annual contributions to my Roth IRA. 2007 was a pretty unimpressive year for the two funds in my Roth (VGTSX and VTSMX).

I believe the US economy is tanking. Totally. And I think I'm prepared for that.

My thinking is that i should NOT stop maxing this out, regardless of how terrible that economy gets. Because I can never "go back" and make up a missed year's contributions.

What would you all do? Keep making contributions into what might be a sinking ship? Or pile the $4k/year or so into my other pile of cash? Unfortunately, vanguard's precious metals fund is closed to new investors.

I'm in my late twenties, have a secure job, and have only moderate mortgage debt.

"Retirement investing" doesn't seem to be a popular topic here. Lemme know if I should have posted this elsewhere.

Jay

Some good advice from other iTulipers here. My opinion:

1. A Roth is fundamentally different from a 401k/403b. As you and I have discussed, your options in a 403b are very limited. In a Roth, on the other hand, you should be able to invest in just about anything you want. In mine, for example, I hold gold (GLD) and Yen (FXY).

2. To me it seems unlikely that Roth rules will be changed significantly. Things would have to be pretty bad. It could get that way, but I think we're talking marshal law scenarios. Think how many people have Roths, and how up in arms they would be. Still, it's not impossible, and it's something you have to factor in.

3. In general, I have no interest in holding stocks or mutual funds right now. There are a few areas where I still hold some stuff in my 403b, but it's WAY down from where it was a few months ago, and especially from when EJ made his call. The only one I still hold a large amount of is Fidelity's Gold, which invests in miners. (There's a lot of controversy here over whether miners are a good investment or a sucker's play. I still hold it because in my 403b it's the only way to hold something related to PM's.) I also have some (about 4% each) oil and ng stocks. I'm making very small investments (less than 1%, but growing slowly) in some other sectors that have been discussed here: consumer staples, infrastructure, alt energy. All the rest is in either a Treasury MM or TIPS mutual fund.

If it were me:
For what it's worth, {which, compared to some of the giants here (small g, Patriots fans), is not much}, I would max out the Roth, but seriously consider whether to continue the 403b contributions. (If you get any kind of a match, I would max that out. After that, I'd proceed with caution, particullarly given the limitations on your specific 403b that we've talked about.) As to what to invest the Roth in, (if you decide to continue it), read a lot of the posters here and other places and try to figure out what you think will happen. If you think all assets will go down, you could do something like Treasuries. If you think gold will go up, then maybe something like GLD. Foreign currencies are another option. Or you could do some of each, to hedge against each possibility. Another option, which just occured to me, that you should be able to do in a Roth is to follow EJ's suggestion to short the market.

Good luck.

zoog
02-06-08, 02:00 PM
I'm in the same boat as many of you. For both my wife and myself, very limited choices in the 401K.

Given what we believe (the iTulip ka-poom theory), I believe the obvious choice (but not the optimal) is the following:

-Eliminate all bonds from your holdings (10%+ real inflation has a way of eating you alive if you hold bonds. Jim Puplava calls bonds "certificates of confiscation"... by the government).
-Some kind of ratio split among large cap and international funds
-I believe that large cap growth/value will give you access to dividend income that will at least pay out even during market downturns, plus many of the large cap US companies will benefit from EJ's prediction of an alternative energy bubble (e.g. General Electric, DuPont, etc.).
-International funds will at least give you a proxy to foreign currency and a hedge against significant dollar only devaluation.
-I would advoid broad index funds (NASDAQ, DOW, etc), except for maybe the S&P. Again, assuming that the S&P is at least a bit more narrow to get you access to large cap stocks and provided your retirement account does not have a large cap fund with a narrower focus (see point above).

Does anyone else have any better suggestions?

This was generally my conclusion when I thought through this a while back. However, I will say that my 401k's international fund (NIVAX), which is primarily a large-cap "value" fund, is down 10% in the past three months. The issue of whether the rest of the world decouples from the US or not has been argued extensively in various threads. I generally do not believe in decoupling, but I did think that perhaps other markets would not go down as much as ours. Now I am not so sure. From an investment perspective, I think it depends a lot on the specific foreign companies held in the fund.

I said in one of the threads linked above that I sold a couple small cap funds and bought the available S&P 500 index fund (VIFSX). The expense ratio of 0.09% is practically free. But I had to "buy the stock market" at a high price relative to where it looks like things are headed. So that may not have been such a good idea. I just didn't want to face losing money in the funds I was already in, while also paying high (IMO) expense ratios to boot.

I've left my other funds alone, but am still debating switching some to the money market fund, in my case VMMXX. It's not going to keep up with inflation by any means, but I figure, in nominal terms, any positive yield is better than negative returns on various stock funds. However, there have been lots of warnings on iTulip about money market funds doing a hindenberg as the credit ratings of the underlying assets get called into question. I really do not know or understand what the true risk of this would be if I were invested in the fund. Is there a real chance of losing my principal? So I have held back on that.

dbarberic
02-06-08, 10:13 PM
Keep in mind, for your money locked in your current 401K, your best choice may simply be one that keeps pace with the real rate of inflation. Because of under-reported inflation, that completely rules out bonds and cash. That only leaves stock. With limited stock fund options, your best hope is to track inflation over the years to maintain purchasing power, until you leave your current company and can roll the 401K over to a self directed IRA with broker account.

You can also only contribute to your 401K to the point where the company no longer provide a match. Save any money beyond the match percentage to a IRA opened up at your favorite broker. Use these funds to invest in more focused items that are designed to do well in this type of enviorment (e.g. natural resources, gold, energy, ect.)

grapejelly
02-06-08, 10:53 PM
That may be so but I think it is unwise to invest in gold (and silver) at this moment in time.

We are in the beginning of a recession and that means to me that all commodities will have a decreasing demand. Furthermore I think that too many people are buying gold with unreasonable expectations. Many think it is next to a sure thing that gold will go up and you even hear people thinking it will reach $2000 to $3000. This means to me that if gold starts to fall these expectations will crumble quickly and that all those folks will run for the exits depressing the value even further.

I'm not sure this is at all true. Gold has done very well in some of the past recessions. It's hard to say because it's only been legal for US citizens to own bullion gold for a short time.

Very few people are buying gold. It has barely begun to wake up. Only financially savvy people are into gold and not much. The ones that are treat gold as yet another speculation like stocks or ETFs.

But I don't think you can speculate in gold like you do other things. Buy bullion as a savings account. A place to park unneeded funds for the long run. Forget trying to time the market or worrying about every turn in the market.

You park money in gold because you don't want to have your assets in someone else's balance sheet as liabilities. Gold has been money for thousands of years. The idea that gold is now electronic or paper is ludicrous.

Back to the topic, there are ways to own physical gold in a retirement account through a trust, I believe. Only certain gold coins are eligible, including American Eagles.

But in a way, it's maybe better to buy gold and silver coins and just hoard them. Buy them for cash and sit on them. Maybe in 5 or 10 years, when gold is king and stocks and paper aren't worth squat, you buy shares in high quality companies, or you buy bonds at real yields of 15% or 20%.

zoog
02-06-08, 10:54 PM
Keep in mind, for your money locked in your current 401K, your best choice may simply be one that keeps pace with the real rate of inflation. Because of under-reported inflation, that completely rules out bonds and cash. That only leaves stock. With limited stock fund options, your best hope is to track inflation over the years to maintain purchasing power, until you leave your current company and can roll the 401K over to a self directed IRA with broker account.

You can also only contribute to your 401K to the point where the company no longer provide a match. Save any money beyond the match percentage to a IRA opened up at your favorite broker. Use these funds to invest in more focused items that are designed to do well in this type of enviorment (e.g. natural resources, gold, energy, ect.)

Yep. Except I doubt stocks (generally) are going to keep up with real inflation either. Let's say real inflation is 10% and the money market fund returns 4%, then in inflation-adjusted terms I'd be down 6%, vs if various stock funds are down 4% (optimistic?) then in inflation-adjusted terms I'd be down 14%. I would only do the money market option for, say, a year. Long term it wouldn't make sense.

My employer does not match our 401k contributions, and I don't really put that much in anyway. I am preparing to open a Roth IRA later this year where I can invest in whatever I want.:cool: