Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Changing the funds in a struggling IRA.
In 2001 I invested $2000 in an IRA just before tax time. As we all know, it was just after this that the economy crumbled. Needless to say my IRA is doing very poorly and is now 'worth' roughly $850.

Is there a way to change the funds in the IRA? My annuity (403B) is actually prospering (they are with different companies). Can I make my IRA match my annuity? I know I should just let it be and eventually the economy will improve and so with my IRA holdings but it's very frustrating!
Susan Saleem:
expert info »
You can put any investments inside an IRA. It is restricted only by the financial institution with which you do business. Banks usually offer CDs and some mutual funds. A mutual fund company offers only their mutual funds (i.e. Janus will offer Janus funds). Brokerage companies have a wider selection of stocks, bonds,mutual funds and alternative investments.

You need to evaluate your specific investment. You do not indicate what investment it is but very likely a mutual fund. It is not always prudent to hang on forever. If you would not purchase that investment today then you should not hold it in your account. As you have experienced with the403B, some investments are better than others.

You can research mutual funds on or by reading financial magazines. Most have an issue where they rate the various funds. The key to successful investing is to continue to add to your investments through up and down markets. Individuals tend to quit buying when prices are low and start buying again when prices have gone up. A good financial adviser can help you overcome the emotion that is involved. Your employer can tell you if you are allowed to roll your IRA into the 403b.
Connie K. Marmet:
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It is not just possible but really a necessity to manage the way that your IRA is invested. IRA's unlike CD's or savings accounts are merely an investment vehicle--it can hold whatever investments you chose, within certain limits dictated by law.

Most investors are unlikely to run into these restrictions and the provider of your IRA of your tax adviser can help you. Check with the institution you hold your IRA with to see what other investment options are offered and pick the one that you think best matches your investment goals and time line. Since you are pleased with how your 403B is working,you could pick similar investments in your IRA although you may want to consider how diversified your overall investments are.

If your current IRA provider does not provide other investment options that are attractive to you, then you can move the IRA to another provider that provides a broader range of investments. The only caveat is that you need to move the funds fairly quickly to the new IRA to avoid tax consequences to it is best to have the new IRA ready to receive funds when you close the old one out.
Gail V. Marquet:
expert info »
The best suggestion is just to hold tight. It sounds like you have plenty of years before you can utilize the IRA funds and the market will respond. You may want to discuss with your investment adviser the possibility of moving your investment to a mutual fund with at least a 10 year track record that averages a 12% return per year.

There are lots of those out there. It sounds like you probably need a new investment vehicle for this IRA. Whether or not you can roll the IRA into your 403B depends on how your 403B plan is written. I'm guessing it's through your employer and they should be able to tell you the parameters of the plan for this option.
Elizabeth Goldsmith:
expert info »
Keep putting money in the 403b since that is a winner and has tax benefits. If you have extra money put it in the IRA after you and a financial analyst have re-evaluated the holdings. You may want to switch funds away from tech and into a combination dividend and growth fund with large cap. company names which you know. So, look for funds which are less volatile and would be buy and holds.

That said, a few of the techs have shown signs of slowly crawling back up and the larger techs such as Microsoft, IBM, Intel etc. react differently than the smaller companies. Good question, lots of other people in the same boat! The way to succeed in a down or neutral market is to learn from mistakes, evaluate, and re-allocate through a plan of action. You may also consider gov. or highly rated bonds or bond funds in your mix of assets.
Gary Silverman, CFP:
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I run into many folk who have lost as much if not more than you have since the bubble burst in 2000. To give you good advice I would need to know what is in your IRA and annuity accounts, but I think I can guess at part of it. In 2001 the stock market(depending what part of if you measure) lost around 10%. In 2002 that lost was doubled. But in 2003 & 2004 those losses were in the most part erased. So,if you are still sitting on less than half the money you began with, this points to your IRA being concentrated in only a part of the stock market (my guess is technology, but other sectors did poorly as well). Since your annuity is prospering, it would seem that it was invested more broadly across the stock market and possibly includes some bonds as well. (Remember, I'm guessing here.)

This points to the lesson you should learn from these last couple years. Namely, that diversification can limit the swings your portfolio takes. Concentrating your assets (like your IRA) will conversely cause those swings to be wilder. This is great in an up market; and you have seen the effects in a down market. Though I do not know who your IRA is with, it is very probable that you can design a portfolio where it will react similarly to your annuity.The problem is that I do not know if either account is designed in a way that is best suited for you. You will want to take into consideration your tolerance for risk, the time frame that your money will be invested for, even the stability of your job to come to a determination of how your money (IRA,Annuity, or otherwise) should be split across the tens of thousands of investments out there.
Nancy J. Nauser:
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Unfortunately investments can lose value. If your investment is in a mutual fund you should be able to move it to a better performing fund. You also have the option to move the funds to another institution (trustee to trustee). If your IRA is in a fixed term instrument there is probably a penalty for early withdrawal. If there is a penalty

I would suggest you wait till it matures before you change it to another investment instrument. Another option is to ride this investment out and see if it turns around so you can recoup some of your loss. If you want more specific information please feel free to contact me.
Lisa Jones:
expert info »
The funds inside your IRA can easily be changed. You need to find a financial consultant in your area that you can sit down with to have an overall financial picture "checkup". This person can determine your risk tolerance and other factors to help you choose the best investment for your IRA (as well as your 403b account).

Many banking institutions have brokerage or planning firms inside them now. You may check with your local bank to see if they offer these services. You may also want to check with your Human Resources Department to get a contact name at the company that provides your 403(b).

An annuity company typically has representatives in the area that could meet with you regarding your IRA as well as your retirement plan at work.
Claudia James:
expert info »
It is important to continually review your portfolio, just as you are doing. The main question to ask yourselfis-Does this portfolio truly represent me and my goals? Before you make any moves I encourage you to do a top-down analysis of the companies you are currently invested in by first looking at the environment, then the industry, and then the company. When analyzing the environment look at the demographics, social issues, political issues, economic issues, technological issues,etc. When analyzing the industry look at market size, growth and decline stages, competition, labor supply, ease of entering/exiting the market, vulnerability to economic trends, stage of development, future trends, etc. When you analyzing the company look at product line, R&D,facilities, management /employees, etc.

I also recommend that you look for a match of your values and the companies values-when there is a match the investor is more likely to stay the course when the company goes into a slump. Remember that every industry and company as well as every individual will go through a slump as they mature-a wise investor is diligent in reviewing the aspects I mentioned above and then determining if they should "stay the course" or move their monies into different companies within their IRA. Which answers one of your questions.