Soon to be IRA money

mtgordon · #1 10-03-2007, 01:50 PM

What do you do with your 5k (someone said the limit was raised this year right?) that you are going to put in your IRA January 1st? I have an extra 1k/month that I invest. However I'm not sure if I should keep putting that money in the market (and take it out in a few months) or if I should just save it up for the IRA.

If I put it into an ETF I have to pay bid/ask twice (no commission due to Zecco) and then taxes on returns. If I stick it in HSBC I feel like I'm not getting enough out of my money. So what's the best thing to do with your IRA money between now and January 1st?

Badger · #2 10-03-2007, 02:36 PM

If this money depleting signifies your IRA not being full I say just sit tight on it in a high interest savings account.
Bad case scenario you lose 20% or 1k, which translates to a lifetime of missed TAX ADVANTAGED gains on that 1k. That's not a wash with the possibility of a lifetime of gains on anything you might make above the 5% savings account.

If you can stomach losing that and have the means to make up any losses in the next year and top off to the full 5k, I say go for it, throw it in an ETF until January.

AL5AcE · #3 10-03-2007, 02:38 PM

I'd just online savings it until Jan 1st. Trading in ETFs = transaction costs + volatility. What if you ended up less than 5k on Jan 1st?

I think that would suck more than the short term gains you might get over the ~4-5% in online savings.

mtgordon · #4 10-03-2007, 03:28 PM

I have enough money in other ETFs that I could sell to get the 5k. I guess another thing is that if I throw it into an ETF that I already have money in is that if I have to sell the original shares it could generate taxes even if the money I just put in loses money right?

Badger · #5 10-03-2007, 03:44 PM

[ QUOTE ]
I have enough money in other ETFs that I could sell to get the 5k. I guess another thing is that if I throw it into an ETF that I already have money in is that if I have to sell the original shares it could generate taxes even if the money I just put in loses money right?

[/ QUOTE ]
Definitely a good point to consider. I took a look at a calendar and lo and behold we're in October. Less than 3 months at a volatile expected return of 10% compared to 4-5% just doesn't seem worth it unless you're very comfortable and accustomed to moving money around like this. Not just for risk reasons, but for bookkeeping/tax reasons, as you pointed out.

gusmahler · #6 10-03-2007, 07:35 PM

[ QUOTE ]
What do you do with your 5k (someone said the limit was raised this year right?)

[/ QUOTE ]It's $4k for 2007 (unless you're over 50).

It's $5k for 2008.

mtgordon · #7 10-03-2007, 11:46 PM

Cool, that's what I was thinking but I had just randomly heard it. It would definitely be 2008 money. Just trying to get it in as soon as possible so it stops being taxed.

prohornblower · #8 10-04-2007, 12:49 PM

I was wondering the same thing...I guess I'll just put it into FNBO Direct as I get it. My problem is double, as I will be allocating $10K, $5 for gf and $5 for myself.