Q. I'm concerned about the declining value of my retirement
investments in our uncertain economy. Since these funds are invested
in stocks and IRAs - rather than concrete, banked savings - I worry
that my retirement income is threatened. Is it possible to lose all
of the money I've placed in an IRA? What low risk options are out
there? What can I do in general to manage the risks to my investments?
A. Unfortunately, it is possible to lose a great deal of your
investment savings, even in their entirety, including those in IRAs.
But you can do a lot to prevent it from happening. First and
foremost, work closely with your financial planner to balance
conservative and risky investment strategies. You should revisit your
strategies regularly, regardless of the economic climate. During
particularly uncertain times, it's a good idea to review your
investments at least monthly.
There are a number of ways to construct a more conservative
investment strategy. For example, you might change from predominantly
higher risk stocks to predominantly lower risk (and lower return)
bonds. You might evaluate the risk factor of individual mutual funds
in your portfolio, and move to funds that are managed more
conservatively. You could ask your broker to put a "Stop Limit" on
your stocks, so that they will automatically be sold if they fall
below a certain price per share. You could also move funds to safer
savings vehicles with lower risks (and lower returns). If you choose
to go that route, here are some options to consider.
- Money Market Funds. Money market funds are short-term government
bonds that typically stay at $1 per share. The principal (the amount
of your original investment) normally doesn't change (it's possible,
but there would be have to be something very dramatic happen to
government bonds). Interest rates vary daily. Money market funds are
low-risk, but they are not federally insured unless you invest with a
bank that offers FDIC-insured money market accounts and your balance
is under $100,000. Generally, you should be able to roll your IRA
funds into an FDIC-insured Money market account (which remains inside
your IRA). Be sure to ask for a "no load" money market account.
However, if you are rolling the funds over from a mutual fund, the
mutual fund company may charge a fee when the money is taken out of
- IRA CDs. Some banks offer IRA CDs. These IRAs are funded with an
FDIC-insured CD, which earns the same interest as regular CD rates
(currently three to five percent, depending on the maturity length).
- U.S. Treasury Bonds. You can purchase U.S. treasury bonds through
a brokerage account. Your initial investment is not insured, but the
backing of the federal government makes it virtually fail-proof. U.S.
treasury bonds take from one to thirty years to mature. Returns range
from two to three percent for the one-year bonds, to five percent for
- Brokerage "Cash Accounts." Many brokerages have cash accounts that
are covered by the Securities Investment Protection Corporation
(SIPC). Similar to the FDIC, the SIPC insures cash in a brokerage
fund up to $100,000 per account. Be sure that your brokerage account
has SIPC protection and read the details of additional coverage
These are just an introduction to the more conservative investment
options that are available to you. Be sure to work closely with your
financial planner to decide which, if any, are best for your long-