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Here is an interesting View of how IRA work !!!

J

JD Seller

Well-known Member
I moved an Simple IRA from the investing company that the last dealership used. They messed up and left $80 in the account. I did not find out about it until a few years after that. I just left it to see how it compared to the one I rolled it over into. It has done a little worst than the "new" account but not by more than 1%.

Here is a summation of how the year end balances have gone.

3/12/03 $80
12/31/03 $992
12/31/05 $29
12/31/07 $740
12/31/09 $643
12/31/11 $734
12/31/13 $998
12/31/14 $1076

It is in a balanced mutual fund. Fees are $10 per year.

The trouble with these type of funds is the uncertainty of the value when you retire.

IF you had retired in $2005 you would have been sunk.

Now 2005 would have been a great time to add money to the fund.

The trouble is all of this is 20/20 hind sight.

If you look at what the fund had done over the life time of investment it is at 8.84% annual return. That is not too bad but not great when you consider inflation.

The long a short of it is that you never really know if you will have enough "saved" to live out your life until the end. LOL
 
You're lucky the fees were only 10 bucks a year. Brokerages like to charge exorbitant fees to small, idle accounts to get them off their books. I made the mistake of leaving 300 bucks in one and it was nearly wiped out a couple of years later.

I guess I don't understand how 80 bucks could turn into 992 a few months later, then drop down to 29 dollars the following year.

A "balanced" fund shifts money in and out of stocks to maintain a certain percentage (say 50 percent) in stocks and the remainder in bonds. These do OK in the long run because they actually can profit from market volatility.
 
Yes but you never take it out all in one year. It is dollar cost averaging in reverse. Take more in good years and less in bad years.
 
Mark I just copied the numbers off the statement I got in todays mail. The other account I have did the same kind of build up and drop.
 
JD, something is missing from your statements.

3/12/03 $80
12/31/03 $992
(992 - 80)/80 = 1140% return over ~9 months; that's a 1520 percent annual return!

12/31/05 $29
(29 - 992)/992 = -97% annual return over 2 years; negative 49 percent annual return. Ouch!

12/31/07 $740
(740 - 29)/29 = 2452% return over 2 years; 1226 percent annual return. Enough to make Bernie Madoff jealous.
 
That's why one can never just listen to the "broker" in charge of your money as he is basing his advice on the fact you are going to live forever and not draw on it until he himself has retired and doesn't care anymore. One and one half years before I retired from company, I "froze" my account. Basically put it all into income preservation funds that drew a guaranteed 3% and I was vested 100% and getting a 75% match from company plus profit sharing from company. All told I was getting 100% on my out of pocket investment every 1/4. That is good enough for me that close to retirement and absolutely zero recovery time from a dip. They (brokers) treat everyone like they are 30 and have forever to recover from things like '05/'07 or 9-11.
 
Mason jars = leftovers from wife's season of canning.
Shovel = in stock , paid for
Cash = hard worked for (leftover per mo. from paying all bills and cheatin' you know who)
VOILA!! retirement fund.

SSHH, keep it to yourselves.
 
you should put 20% of your retirement in scratch off tickets, 40% in state lotto, and 40% into powerball/mega millions.


You'd at least be honest with yourself and not expect much to be left in there.

Hindsight is 20/20 though. IF I knew what would have happened out your way in 2012, I would have planted 300 acres of corn instead of 100 acres. Then, I would be able to carry myself well through this time of $4 corn. (Call it $3 corn, I'm stuck with transport costs and drying. No bins, no truck/trailer)

Also, if you cold have bought acres at $4000 per acre years ago, that are now worth $10,000-12,000 per acre, your return on investment would be astounding.

Hope you are feeling better from your flu before Christmas. This weather doesn't help.
 
It would be interesting to me to know the name of your "balanced mutual fund" these funds were in.
Probably a 5 letter symbol or full name of fund.
The fluctuations in your account are most strange.
 
There must be decimal missing one digit to the left of each figure except the first one, surely the last entry is supposed to read $107.60?
 
Well Guys I am NOT missing a decimal point. Those are the dollar figures.

The fund is:

American Balanced Fund-A Fund number:11
Symbol: ABALX Objective: Balanced

Annualized return since initial investment: 7.48%

YTD return since 1/1/14: 8.84%


This statement is not as easy to read as my others ones. I agree with the interested rate calculations not seeming to be correct.

The fund is actually just a little over 40 shares of this fund. The current value of the shares is just over $25 per share.
 
Sorry, JD, but I'm not seeing those wild price swings from 2003 - 2007. The price ranged between a low of $14/share in Feb. '03 to a high of about $20.50 in Sept. '07. The only explanation for your bizarre balance swings is that money was going into and out of your account outside of your investment gains and losses. My guess is the outflow was fees and the inflow was deposits made on your behalf by some third party.
Share price history for ABALX
 
I bought ABALX in 2003 and my results over same time frame are totally different than yours.
I did not experience the wild swings you did.
Some of your 2 year swings are beyond phenomenal for a balanced fund.
Keep digging as I think there is more to the story.
 
Sometimes it is nice to not have any investments and then no one can tell me I am reading them wrong. I outlived mine already.
 
(quoted from post at 03:29:53 01/06/15) That's why one can never just listen to the "broker" in charge of your money as he is basing his advice on the fact you are going to live forever and not draw on it until he himself has retired and doesn't care anymore. One and one half years before I retired from company, I "froze" my account. Basically put it all into income preservation funds that drew a guaranteed 3% and I was vested 100% and getting a 75% match from company plus profit sharing from company. All told I was getting 100% on my out of pocket investment every 1/4. That is good enough for me that close to retirement and absolutely zero recovery time from a dip.
Click to expand...

This is a safe strategy but not necessarily a good one, unless you are really old and don't plan on living much longer. You forget there is still inflation in the economy and don't think your local gub'ment won't still want their taxes and those increases so they and the teacher's union will have a comfortable retirement. A a "stand fast" strategy actually puts you further and further behind every year. If you live long enough you could find you don't have enough to live on like you did. Keeping some at risk for higher returns can help mitigate the inflation issue.

I'd advise anyone to talk to a financial planner to determine what you'll do post retirement, including how you will manage investments, Social Security and pension.
 
I use Morningstar to analyze funds. You have to do a lot of homework before investing in a mutual fund. It is important to look at the history of management of the fund, fund growth, fund risk, and many other factors.

I have evaluated numerous funds for people. Morningstar is a really good baseline to start with. Important to look at the time value of money over the duration of the investment as well.
 
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