I Know NOTHING About Investing In The Market, But I Just Heard Something That

[ChiciB1]

made a chill run up my spine. We have an IRA with Morgan Stanley Smith Barney and a comment was made about them getting sued.

Is my money safe or should I get it out now. Does anyone know what I'm talking about. I only heard a blurb from CNBC Market Wrap. Not that I have a lot, but I sure can't AFFORD to lose ANYTHING.

Thanks for any help!

[Kennah]

1. Is the money in your IRA in mutual funds?

[ChiciB1]

2. Yes, Almost All Of It... n/t

[Kennah]

3. They aren't protected by FDIC, but it's still your account, so you should be safe.

Being in a mutual fund, the money is scattered about in stocks (GE, Wal-Mart, you name it).

Now, any sort of "adverse action" like federal action against the big banks could cause the market to drop and drive down prices, but I don't see how the account could ever be seized to pay debts, in theory, if the bank went bust.

[ChiciB1]

4. Do You Think It Would Be a Good Idea To Transfer To Another IRA

like a Roth or something? Looks like I'm going to be losing money no matter what because it IS tied to the market. Or maybe just transfer it over to my Credit Union IRa account.

I'm glad some action is being taken against banks who screwed us, but my money is MY MONEY for now. Having it lose even more value isn't something I'm interested in.

BTW, I just found the NYT article that covered this announcement but haven't read through it yet.

[Kennah]

6. Talk to someone knowledgeable before switching from Traditional to Roth, or vice versa

Local CU would make a lot of sense.

[A HERETIC I AM]

10. A couple of things to keep in mind about IRA's;

First of all, you have nothing to worry about re: the value of the account if the custodian goes belly up. The solvency of Morgan Stanley or the prospect of them being sued for any reason have nothing to do with your IRA, unless you hold Morgan Stanley stock inside the IRA. What I mean is, lets say your IRA is $10,000 and ALL of it is in Morgan Stanley stock. If Morgan Stanley goes in the shitter and their share price goes to ten cents, then yes, your account value is buggered.

If however, you have most or all of the account invested in Mutual Funds, then the value of the mutual fund shares themselves will NOT be affected by any drop in price of Morgan Stanley, with the small proviso that there may be MS shares held by one of the mutual funds. If that's the case, you'll hardly notice it, because it will be a very tiny percentage of the whole and that represents the beauty of investing in Mutual Funds - diversifying in such a way as to reduce risk.

If you have a Traditional IRA, the money that you contributed to that account is money that has yet to be taxed, in other words, it is money that comes from the "gross" portion of your income, as opposed to the "net". A Roth IRA is funded with money that HAS been taxed (think of it as "checkbook money"), so if you move money from a traditional to a Roth, you are going to incur a tax liability.

The IRS calls this process a "conversion" and the rules for such conversions have been relaxed. Go to www.IRS.gov and type "IRA conversion" in the search box. You'll get the appropriate publications which describe the process and the liability.

In a nutshell (or maybe an Avocado husk!) here's what happens when you do such a conversion;

Lets say you have, for the sake of round numbers, a hundred grand in a traditional IRA and you want to convert it to a Roth.

If your income for the year is juuust below the highest tax bracket, converting the entire amount will push you into the next bracket. The IRS looks at it as if you had gotten a $100,000 raise for one year and just one year. You can, if I am not mistaken, spread the conversion out over a couple years, thus lowering the tax hit. You need to consult with a Tax Attorney or carefully and thoroughly read the IRS pubs for that answer.

When you take a distribution from a traditional IRA later on in retirement, the money is taxed as ordinary income, because, as I said above, it is money that hasn't been taxed yet. The beauty here is, any gains you have realized are taxed at that same rate, not as capital gains, and ordinary income tax rates can be lower than Cap gains rates. It depends on how much trading you did inside the account.

Are your eyes glazing over yet? lol

With a Roth, the distributions ARE NOT TAXED AT ALL, because the money you put in was already taxed and even any gains you realize are tax free as well.


SO.....

It CAN make sense to convert a traditional to a Roth IF a couple of things are true, such as;

1) You have enough time left to retirement for the loss that was due to the taxes can be made up by market gains ....OR...
2) You have enough in plain old savings accounts to pay the tax liability, thus letting the entire converted amount end up in the Roth.

Clear? .....again....lol...It is confusing, I know.

If you have multiple IRA accounts, you can most certainly consolidate them into a single. It is simply a matter of doing an account transfer. Talk to the account manager/broker at the institution you want to transfer TO and have them set it up. You will have to provide them a copy of the latest statement from the other IRA's and sign a form or two. You can transfer the accounts "In Kind" meaning you are able to move mutual funds, stocks, bonds, ETF's etc., held at one brokerage to another, with a few exceptions.

Hope that helps a little.

Take a breath. Morgan Stanley being sued is not a death knell for your IRA's. Relax.

[ChiciB1]

12. Thanks You For This Information... I DO Get IT. One Reason We Didn't Go

with a Roth was because the money has NOT been taxed and when we withdraw we know we will have to pay the taxes. But paying taxes on a smaller amount later than the total amount yearly will be less. This much I know because the money has been saved from a pension plan then rolled over to MSSB. A friend of ours said it would be more beneficial (as a profit) as opposed to simply setting up a traditional IRA. So, I sit and watch the market from time to time, but NEVER "play" with placing bets. Some have told me it's easy, but I'd rather not. I do have a couple of friends who play all the time, but lately some aren't so happy.

I appreciate your input, just get jittery about the economic situation because I do have "some" money but it's retirement money that I think we'll be needing in the future. Because we made the decision to buy land, what we have saved needs to be available because my husband retired early to care for his mother. So now, almost everything is tied up in one way or another and we don't want to sell the land until we ABSOLUTELY have to. Taxes and insurance or our home, plus taxes on the land have put a crimp on us. OH WELL! Live & learn.

Best laid plans aren't going to come to fruition right now.

Thanks for the help.

[A HERETIC I AM]

13. If I understand you correctly, your current IRA was formed when you rolled funds from....

either a 401(k) or a 403(b) or something similar, right?

You may be way ahead of me here, but I just want to make sure I'm clear, as what you wrote above is just a tad confusing.

If you'll indulge me, allow me to pick your post apart!

One Reason We Didn't Go with a Roth was because the money has NOT been taxed and when we withdraw we know we will have to pay the taxes. But paying taxes on a smaller amount later than the total amount yearly will be less.

Weeellllll....maybe! It really depends on what happens to tax brackets in the future as well as how much on an annual basis you project you would be distributing from the traditional IRA when you retire. Now I want you to know, I am NOT giving you advice here one way or another, just trying to make sure you are clear on your options. If you did do the conversion you are right in that the taxes due would be a big hit now, but the thing is, it may be less that the total paid over time later on. Like we both know, when you take a distribution from the Roth you will owe no tax at all, which has a kinda nice sound to it! Plus, with a traditional IRA, you have the "RMD" to worry about (Required Minimum Distribution) every year. You HAVE to take some out after 70 1/2 years old whether you need it or not. There is NO such requirement with a Roth, plus a Roth has other advantages with regard to beneficiaries, for instance. It is something to bear in mind.

This much I know because the money has been saved from a pension plan then rolled over to MSSB. A friend of ours said it would be more beneficial (as a profit) as opposed to simply setting up a traditional IRA.

This part is a bit confusing. When you do a rollover from a defined contribution plan (another name for 401(k)'s and 403(b)'s), the IRA that receives the funds is often referred to as a "Rollover IRA", but for all intents and purposes, a rollover IRA is exactly the same as a traditional IRA, at least from a tax and distribution perspective. If you had rolled from the previous plan into a Roth at that point then yes, you would have had the tax liability. Rolling to a traditional (or rollover, whatever they want to call it) IRA is the most common procedure and there is nothing wrong with it at all.

So, I sit and watch the market from time to time, but NEVER "play" with placing bets. Some have told me it's easy, but I'd rather not. I do have a couple of friends who play all the time, but lately some aren't so happy.

Completely understandable. Picking individual stocks is not easy to get right. That is why Mutual Funds are so effective for the average investor and their long term investing. They are managed by (usually) a team of people who do nothing but research stocks all day. You basically have professional money management on your side and you pay a comparatively small fee for it. Having said that, one mistake most often made by the average investor is to panic during times like this, sell out of the Mutual Funds they own during a downturn and then buy back in when the market recovers and they feel comfortable again. The old "Buy low, sell high" idea thrown right out the window! If you own one of the common, Large Cap "Growth" type mutual funds and you are reinvesting dividends and interest(if any) then that happens all the time, so even when the share price is down, you are buying more shares at a lower price automatically. With mutual funds, a long term time horizon is best, and by that I mean AT LEAST 5 YEARS, better off more like 20.

In case you aren't aware, here's a website which can give you all sorts of information about the funds you own, all you need to know is either the full name of the fund or its 5 letter symbol. All open end mutual funds have a 5 letter symbol ending in "X". All of them.

www.morningstar.com

I wish you all the best.

[ChiciB1]

15. Rollover Was From 401k & I Am Aware Of The RMD, But Not Worried About

that right now. Not having to do that, just worried about the lawsuit. I checked the IRA and it is PGHBX... Pioneer Global something. And it's invested at 99.81% Mutuals which from what I gather by your comments is why I'm NOT seeing a lot of fluctuation. I have wondered about THAT one recently when the market dropped and I didn't see a great loss, but not seeing great gains either. I'm GLAD you explained this to me.

I'm thinking that we should just leave it for now and pray somehow that we can sell our acreage BEFORE we hit the RMD. With ANY luck, perhaps in 3 or 4 years we'll feel better about selling, but right now we'd have to practically give it away. This is Florida and housing and land is selling at a snails pace, and very low.

Thanks for the website and I'm going to check it out, but with the information you provided it looks like we will be safe in keeping things just as they are for a while. I didn't know how the lawsuit was going to impact our money and was feeling antsy. I don't want to move anything as long as the lawsuit isn't going to take my money away. Right now we don't have a large yearly income and my husband is now 60 so we can take money out, pay the taxes and very probably get it back when we file taxes. Five to seven thousand yearly will keep us from paying any income taxes right now. And we will need to take some money out because our savings account is scrapping bottom right about now. It would be very nice if we could sell land, but we've decided to limp along and hold out as long as we can.

As I said, my real worry was losing what is in the IRA, but from what you and others are saying, it's out money and the lawsuit can't take it away. Fingers crossed.

Never thought I would have to worry this much, but I know there are many people who are doing so much worse. We have no worries about losing our house, just can't stand the rising prices everywhere I go. I'm good at pinching pennies and don't buy anything we don't need right now. Can't go anywhere anyway as a caregiver.

I really do appreciate your interest here and thank you for taking the time to explain some things that I wasn't aware of. I'd pray, but I'm not one of those types. Raised as a Catholic but left a long time ago and never looked back. And now, I DON'T think this is happening because I'm not a Christian! It is what it is. This country has changed so much from when I was younger and I feel much more fear about the future than I thought I would.

I AM NOT ALONE, I'M SURE...

[A HERETIC I AM]

16. PGHBX = Pioneer Global High Yield fund. A bond fund.

http://quote.morningstar.com/fund/f.aspx?t=pghbx

A high yield bond fund.

Basically, a mutual fund in which the overwhelming majority of its portfolio are bonds that pay a high coupon and/or bonds that the manager has bought on the cheap and can sell for more than they bought them for.

85% of the portfolio is Bonds.

4.5% is currently held in cash.

0.48% is in stocks.

The expense ratio is rather high @ 1.92% which means they are taking almost two percent off the top to manage the fund.

The status is "closed" which means they are not selling any new shares of this class at the moment.

It has a decent yield, at 6.86% which means that for every $1000 in value you own, you are getting $68.60 per year in return currently. Not bad, but not without substantial risk, as shown by the charts at the link above. That shows "growth of a $10,000 investment, BTW. Yahoo Finance will show you share price;

http://finance.yahoo.com/echarts?s=PGHBX+Interactive#chart1:symbol=pghbx;range=1y;indicator=dividend+split+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

The average annual return over the last ten years is impressive at 9.05%

For the last year it averaged 5.73% Pretty good.
For the last 5 years, which includes all the mess we went through lately it averaged 5.09%. Still pretty good.
It's down year-to-date by 1.9%.....so......no biggie, as long as your time horizon is out there.

It is rated 2 out of 5 stars by Morningstar. Those ratings reflect PAST performance and should be regarded as such.

Hopefully you bought a bunch of this in April of 2009!
http://finance.yahoo.com/echarts?s=PGHBX+Interactive#chart1:symbol=pghbx

54.4% of the bonds they hold are rated "B", only 0.78% are rated "AAA"

49.82% of the bonds they hold are from US Corporations.

33.81% are from Foreign Corporations.

The majority of the bonds they currently hold will mature between 7 & 10 years.

The majority of the bonds they hold have a "coupon" of between 8% & 10%.

They currently hold absolutely ZERO US Government debt securities.



http://portfolios.morningstar.com/fund/summary?t=PGHBX®ion=USA&culture=en-US

I seriously want to avoid giving investment advice. It is a bad idea to give it on the internet and an even WORSE one to take it, but if this fund represents 100% of your IRA investments then I would suggest you look into a little more diversification. You are a little steep on the high yield bond side of things!


Pioneer funds website;

http://us.pioneerinvestments.com/?jumpto=Investor

Their list of Mutual Funds;

http://us.pioneerinvestments.com/funds/fundlist.jsp?navid=8&navvr=150

You can generally change from one fund to another inside a fund family with NO charge.



You should talk to your broker about this fund and determine if the allocation you currently hold is really right for you.

And FWIW, raised Episcopalian, now Atheist, so there you go!

[ChiciB1]

17. WOW! You Have Impressed Me... And I Will Be Calling My Broker!

See, I had no idea what was what and I really appreciate all these links. Actually would have not even given any of this a 2nd thought if the lawsuit thing hadn't raised my eyebrows. But 2 stars out of 5 concern me because perhaps we can do something a little better. I also do understand your "disclaimer" of sorts, but you've given me some good advice to pursue some avenues w/broker. As I said, no real fluctuation in any way lately even when stock market goes up or dives. I wondered about it, but not making or losing money seemed "safe" because of the recent volatility. Just checking in less right now because my 2 yr. old grandson is with me and taking up almost ALL my time this week-end!!!

Plus, I'm an avid tennis fan and the US Open is about to enter it's 2nd week. My favorite player is Novak Djokovic, been watching him since he came on scene and now he's NO. 1! I played for a long time but stopped about ten years ago. Between work, care-taking and babysitting it seems I haven't been able to find enough time to get back to it. Was in 2 car accidents and my back sustained some damage and I was fearful about hurting it again, but I'm thinking I want to try again. Ortho Dr. said to start slow, but tennis is a fast game. Can't STAND running. Thinking that staying active & away from politics would be good for my mental state because I'm really fed up with what I'm seeing all around. Obama was NEVER my 1st choice and I need find a way deal with my disappointment. I've said I will vote for him, especially given where I live because this state is one he could lose if he doesn't get it together... like last year or something! Will have to hold my nose though.

Anyway, I can't tell you again how much I appreciate your help and the tips. I don't think I have much faith in what I'm seeing out of D.C.! I've gave up on Florida a long time ago because most Dems in the local Party are really to the right of me, REALLY! A couple of us tried to stick it out but it became clear how the wind was blowing.

Guess I've ranted enough, and I too consider myself an Atheist which my 5 sisters find APPALLING! I read "The God Delusion" by Richard Dawkins and found it a heavy read, but his views made more sense to me than the other illusion I was raised with!

Now I need to save these links and get back to them tomorrow. Thanks again!

[A HERETIC I AM]

18. One last thing....

DO NOT, under ANY circumstances let the broker talk you into another "Class B" share. They are the most expensive to own.

The "A" share of this same fund is ticker "PGHYX" and its expense ratio is 1.10%, eight tenths of a percent less than the "B" share. The yield on the A share is better as well because the fees are lower.

What you have to look out for is any fee involved in unloading shares you currently hold. B shares of mutual funds have what is known as a "Contingent Deferred Sales Charge" or CDSC. The CDSC is charged on a sliding scale which diminishes the longer you hold the fund and is typically 5 years but can be up to ten. You need to ask the broker how much if any would be due in a CDSC if you were to liquidate any shares.

The broker should and can easily tell you cost of ownership projections for ANY mutual fund he sells and compare those to almost any other fund and share class. If he can't, his company has crappy software subscriptions!

I can tell you right now why he sold this fund to you; It looks initially attractive because you weren't charged anything to buy it BUT the broker gets a better "Trail" or percentage of the expenses on an annual basis than he would if he sold you the A share. He would have gotten a commission up front on the A, but a very tiny trail. The B class pays him much, MUCH better the longer you hold it.

One of the largest mutual fund companies out there - American Funds - did away with B shares a few years ago, because they felt their customers were being abused by the sales of B class shares.
https://www.americanfunds.com/funds/classes/details.htm#class-b

[ChiciB1]

19. NOW, I'm Going To Print Your Information For Myself So I can Refer To

it on an "needs" basis. Clearly I know so very little about all of this. Don't worry, I'm taking this as advice, but GOOD advice nonetheless. I'm not unintelligent, actually always maintained high grade point averages, but STOCKS... not even in my ball park!

You've given me a lot to chew on before I contact my broker, and I wouldn't have even gone with Morgan Stanley had it not been for a couple of friends who were already invested with them. Now, I'm always hearing horrible things about them, but I feel I'm stuck in mid-stream and need to make the best of it.

Perhaps with your added input I can let my broker know that I have and "inquiring mind" at least.

Mucho Gracias!

[Po_d Mainiac]

21. yer kidding..Right?

Do a 12mo overlay with the e/s..It moves lockstep

It's now down 5.5% YTD (6% for the month)...$1K in 12mo ago now = $945

High risk with low yield

[A HERETIC I AM]

22. I read what I posted right off the Yahoo & Morningstar links. n/t

[tortoise1956]

20. Something to consider before rolling into a Roth...

Clarification: I am not a financial expert, and I've never stayed in a Holiday Inn Express.

With that said, aside from other financial concerns, consider this - what is stopping Congress from lifting the tax-free status on Roth withdrawals? That would mean you pay taxes on both deposits and withdrawals. I'm not saying this will happen, but I don't put anything past the money-hungry greedbags in Washington.

In any case, talk to a financial professional first, and find one that doesn't have a stake in the outcome of your decision.

[izquierdista]

5. The SIPC insures brokerage accounts

Here is their website: http://www.sipc.org/

You would have recourse with them if MSSB did something fraudulent with your account. Your account is segregated from their operating funds, and anybody getting a judgment against MSSB is not going to be able to put a claim on your money.

You can always roll your IRA over to someone that you feel comfortable with. I would suggest finding another broker with a local office where you can walk in and talk with someone, if you are uneasy about MSSB.

[pa28]

7. IMO he's referring to the FHFA lawsuits over fraudulent mortgage originations.

http://www.forbes.com/sites/afontevecchia/2011/09/02/fhfa-sues-17-banks-over-massive-mortgage-losses-at-fannie-and-freddie/

Under normal circumstances I might worry if combined with some other issues JP Morgan has. However, it's practically a matter of law that they are too big fail. Don't worry.

[ChiciB1]

8. Thanks For The Links... Will Do Some Research, But Input Here Is

always helpful. With so much flim flam going on, and I as a novice in this type of stuff I need all the help I can get. We have some land investments... BUT, that's clearly not going to be an option to capitalize on for a while Just trying to ride it out for several years before we can find a way to make some profit. Living in Florida with land isn't what it used to be, but when we bought 15-16 years ago it seemed a good way to go. So given that we screwed up on that idea, we really need to keep the our cash as safe as possible.

Thanks again. Will be making decisions, and of course we can probably "go safe" with our credit union, but again not what we had wanted to do.

Really sour lemons these days.

[Yavin4]

9. All Money in the Market Is at Risk

There is no such thing as safety in the market.

[golfguru]

11. MSSB is just the custodian of your account

Your money is safe, no need to panic. However if they get in huge trouble,
you could transfer your IRA to another broker. You will have plenty time.

[OllieLotte]

14. Relax. You have nothing at risk as far the lawsuit is concerned.