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IRA not FDIC insured?

Discussion in 'Bad Dog Cafe' started by doghouseman, Mar 4, 2021.

  1. warrent

    warrent Friend of Leo's

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    There is the The Pension Benefit Guaranty Corporation which insures private defined benefit pensions but not defined contribution plans in the USA.
    https://www.pbgc.gov/
     
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  2. warrent

    warrent Friend of Leo's

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    Cool, I have this idea for robot tuners if you want to invest:p
     
  3. JamesAM

    JamesAM Tele-Meister

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    An IRA is not a savings or money market account- the money is held in securities, not liquid cash. It’s a vehicle to increase the rate of return of the cash you put in by increasing the risk of how your money is held. Instead of being held as cash that is then lent out and paid for with interest to you, as in a savings account, it’s held in securities that the brokerage holds for you. An IRA is a gamble, in that you’re getting paid for the market effect on shares of a company or company debt instead of being paid for holding your cash for you. You don’t get insurance for making a bad investment, but I don’t think that’s what you’re asking.

    the big thing you mention is “if Schwab goes under.” This is literally what happened in 2008, when investment banks were wayyyy overleveraged with bad derivatives and didn’t have the cash on hand to administer people’s retirement accounts. This is what insurance is for- not individual personal bad investments, but for I-banks running riot on bad investments, which they are still doing today.

    the crappy thing is the vast majority of us are now in this game against our will with 401ks- there are very few private pensions anymore, so we have to deal with the market or put our cash in the bank, with like a .005% rate. We’re basically held hostage by the i-banks, and have to hope they don’t do anything stupid like they did in 2008. Which, who knows.
     
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  4. beninma

    beninma Friend of Leo's

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    As others have said your IRA and 401k are not deposit accounts and don’t have those protections.

    This is the risk/gain balancing act of investing. Securities are historically much higher return.

    And savings, money market, and CDs have had horrible horrible rates the last 10-12 years. Often they’ll barely give you 1% on an account you keep a $100k balance in, which is ridiculous.

    As you get closer to retirement you’re supposed to adjust your ratio of risk vs return. That’s what financial advisors are there for. Just if you have any real savings look for an advisor you pay directly or as a % of gains on your portfolio. Particularly if you’re low or middle income or young it’s easy to get funneled to an advisor with conflicting interests who gets commissions for putting your money into vehicles that benefit the bank he/she works for.
     
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  5. beninma

    beninma Friend of Leo's

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    Maybe older folks are stuck in a job and can’t move 401k accounts around but anyone who changes jobs can roll their 401k into an IRA at the bank of their choice and get control of how it’s invested.

    My current 401k since 2014 is at Fidelity. I am not a fan of Fidelity and have rolled money out of Fidelity at the first chance in the past. But they offer enough variety in Funds my financial advisor never has trouble coming up with good choices in the Fidelity options. (My advisor is not at Fidelity)
     
  6. telemnemonics

    telemnemonics Telefied Ad Free Member

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    I don't have a solid understanding of the IRA aside from having had one that the rep was loathe to explain, and knowing a good number of retirement age folks whose IRA dropped 50% or so a couple of years ago.
    There are different types of course, and maybe the more aggressive options are the ones that are more of a gamble.

    I suppose we all have our own definitions of gambling too!
    Many consider marriage a gamble, and for certain the life of a musician is a gamble.
    Expecting SS to be there for us is less and less a gamble while more and more just a really poor choice, not unlike picking a fight with the biggest drunk at the bar!
    Wish I could get back all the money I paid in that I suppose went to silent generation or greatest generation retirees?

    I also managed my Mother's retirement stuff after she got dementia, and worked with her wealth managers.
    Interesting how all those certificates or whatever the term is for the whole gamut of financial planning agreement docs you can sign onto.
    Diversity seems to be a good plan?
    No single basket document with all your eggs in it?
     
  7. JamesAM

    JamesAM Tele-Meister

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    Great. I’m not interested in investing the money, either on my own by someone on my behalf. I’d prefer the sure thing of a pension as opposed to investments that can collapse on the whim of hedge fund managers playing short games, but I unfortunately don’t have that option.

    Who should operate that pension- either my company or the government- will certainly get me in trouble here, so I’ll stop there.
     
  8. beninma

    beninma Friend of Leo's

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    If you don't want your money getting played with by Hedge Funds:

    - Don't send any of your money to hedge funds
    - Invest in safe investments that aren't subject to hedge fund games

    Pensions are far from safe.. way too many companies yank them away right before retirement on a technicality or get taken private and the private equity guys engineer a way to pay themselves the money in the pension fund.

    What makes you think you're going to have any control over a pension?
     
  9. jfgesquire

    jfgesquire Tele-Afflicted

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    IRA's are protected from creditors up to like $1.3 million.
     
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  10. doghouseman

    doghouseman Tele-Holic

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    Really??? I would think that would be fair.
     
  11. JamesAM

    JamesAM Tele-Meister

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    Seriously? Have you not been watching the GameStop stuff recently? 2008 with cdo2 and default swaps? Hedgies, i-banks, and derivative guys will always find a way to suck up too much of a good thing and leave good folks holding the bag. You can hold on to all the “safe” index funds and ETFs you want, but it’s all still subject to greedy folks whose jobs depend on them getting around the rules following the rules.

    I work for a company and have some form of representation there, in the form of a union or otherwise. Ideally I’d own part of the company as an employee. I have representation in the government. At least I have a chance, however small, of complaining enough to change those institutions. I don’t have representation in the market.
     
  12. beninma

    beninma Friend of Leo's

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    Do you know for sure your pension wasn't invested in Melvin Capital (which lost billions shorting Gamestop) ? Pension funds DO get invested in hedge funds.

    Do you know for sure your pension wasn't holding GME?

    Do you know for sure a Mutual Fund or other type of fund your pension was invested in wasn't holding GME?

    Can you actually find out?

    Will the people who make the decisions actually pick the phone up and talk to you?

    Would they ever change their mind if you asked?

    That's what this is all about. You have no control over that pension, you're betting on:

    - The people who make the decisions about the pension fund do not have conflicting interests
    - The people who make the decisions about the pension fund are intelligent
    - The company continues to grow and doesn't mismanage it's money

    There are major risks there. It's not like a pension is a bad thing but you have no control over it and it is not a sure thing. The company you work for can go bust. There's more chance of that than the entire market going bust over time.

    With a good 401k, IRAs, and privately invested savings you can answer all those questions and you can make changes if you don't like the answer. And if the money is intelligently invested you have little to fear about weird stock manipulations like GME.

    Here is a story from the last 6 months about pensions losing hundreds of millions or billions of dollars making poor decisions and buying into risky hedge funds with employees money:

    https://www.marketwatch.com/story/n...0-million-in-collapsed-hedge-fund-11601224350

    Zero fear of that happening with a 401k or an IRA where you have direct control of the funds your money goes in. The whole rest of the body of employees could lose their shirt and if you were smart and careful you would be totally unaffected.
     
  13. dented

    dented Doctor of Teleocity

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    Creditors and Civil Suits are two different things.
     
  14. jfgesquire

    jfgesquire Tele-Afflicted

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    Creditors can't self help. They must get a judgment in a civil suit.

    Then they are a Judgment Creditor.

    And those assets I stated are exempt from judgment creditors.

    I am an attorney. This is what I do.
     
  15. W.L.Weller

    W.L.Weller Tele-Holic

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    Sure you weren't looking for the Total Deposits Prime Retirement & Investment forum?
     
  16. doghouseman

    doghouseman Tele-Holic

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    So, just to be clear. I was thinking what happens if I have my IRA all in cash and Schwab goes out of business? Or what happens if they dont give me time to close out my stock sales because they are going out of business? But, it would appear that there is some insurance coverage for that scenario.

    I am not expecting bad stock purchases to be covered!

    As for what happened in 2008, there is a good movie called 'the big short' which details what happened in the markets.

    Not to get political and to describe what was going on in the markets - looks like Standard and Poor, the company that provides ratings for investments (like AAA rating) were asleep at the wheel and giving these credit default swaps (CDS) a really high rating when the CDS market didn't deserve a high rating. So pension funds, which look for safe investments, and look to the S&P to assess the risk, were buying these CDS, because they were rated as being very safe, when they were not. When the CDS market crashed, the pension funds lost money.
     
  17. doghouseman

    doghouseman Tele-Holic

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    in your head man....
    I actually like asking these kinds of questions in a unrelated forum because you get a lot of unbiased opinions.
     
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