If you are self employed, in this economy is it better to put your money in a Roth IRA or just buy a CD with a good interest rate?
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M$6 Answers
As far as savings go, IRAs and CDs are not mutually exclusive. You should both save or invest both in retirement accounts, and in personal savings or investment accounts at the same time if you have the available cash.
The benefit of an IRA at this point is that you should be able to put money into an IRA before you file taxes for last year up till the April deadline and apply the deduction to last years taxes.
The money you choose to put into an IRA you should assume that you cannot take it out until retirement age without significant penalty, so you should keep enough money in personal savings or investment accounts that you may need to be able to access and utilize if you need it.
Money you put into an IRA will still need to be put into an investment vehicle of your choosing.
You may also want to look into SEP IRAs which are specifically for self employed persons.
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M$
NEITHER.
Unless you have at least one year's living expenses in cash, savings, or a money market account. You hang on every cent you get your hands on until the economy improves to the point you can be confident your business is going to be OK. Normally I would say six months expenses but this is NOT a normal recession. )
I do not recomment CDs because you cannot get a "good" rate in this market. Buying any investment, even a CD has an intangible cost called the "opportunity cost"
See: http://en.wikipedia.org/wiki/Opportunity_cost
A 5000 cd for a year today will net you no more than $110.00 gross. $77.00 after 20% income and 10% self employment tax. Do you think it a good idea to give up access to $5,000 for one year for $77.00?
Then and only then, fund an IRA Account to the maximum allowed. Whether it should be ROTH or conventional IRA depends on your age and tax status. You should ask your CPA to do the math for you.
You didn't mention if you have employees. If you do, you should ask your CPA about a SEP plan. With this option you can put up to 25% of your gross income ( pretax ) into the plan. This would significantly reduce your taxes and enhance your retirement account.
Only after the retirement account is funded should you consider other investments.
Self employeed since 1980.
Note: I am not saying CD's are not a good investment. I am saying they don't pay enough in this economy to take the chance you might need the money and not be able to cash the CD early.
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M$Good Luck!
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M$Pazaq makes some valid points about gold not backing any major currencies and not being used as much in real world applications, but this has been true for quite some time and the price of gold has been adjusted for those factors. If anything, the current weaknesses being displayed by the fiat currencies (currencies backed by nothing) of the world make gold a more attractive investment.
If you would like an in depth explanation of why to invest in gold (among other things) I would highly recommend checking out what economist Peter Schiff has to say...
YouTube - http://www.youtube.com/watch?v=2I0QN-FYkpw
His website - http://europac.net http://europac.net/archives.asp
Weekly podcast - http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=292655537
His books (I highly recommend Crash Proof) - http://www.amazon.com/s/ref=nb_ss_gw?url=search-alias%3Daps&field-keywords=peter+schiff&x=0&y=0
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M$
Given the huge flexibility of investments, assuming you don't need to access the money such that you would hit early withdrawal penalties, the Roth IRA is considered superior as you pay taxes on the income before investing it. All interest earned then continued to grow untaxed and the money will never be taxed when you take it out.
Over a longer period of time this works to your advantage.
Personal Experience
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M$You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
It's just my opinion but this answer is not helpful and is just not true. Gold has reclined many times in the past. And in actuality is not as valuable as it once was. It currently is on a great run because of people saying things like this and believing it. But because gold backs very few currency these days and use in real world applications is lessening (They use less and less gold in computer manufacture for instance.) as a protection from money loss it's likely to not hold up. If you were going for rare metals Platinum is more likely to hold up these days. A small plot of farm land would also be useful if your the doom and gloom type.
US economy suffers sharp nosedive
The US economy shrank at an annual rate of 6.2% in the last three months of 2008 official figures show, a far sharper fall than previously reported.
Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualised figure down from an earlier estimate of 3.8%.
The decline was much worse than analysts had expected, sending US stocks spiraling lower.
In 2008 as a whole, the economy grew by 1.1%, the slowest pace since 2001.
The blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66%, to 7,062.93. The broader Standard & Poor's 500 Index fell 2.36% to 735.09 - a 12-year low.
Consumer spending, which accounts for about two-thirds of domestic economic activity, fell by a rate of 4.3% in the final quarter - the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5%.
With rising unemployment, sliding home values, increasing numbers of repossessions and the slumping value of investments, observers say many US consumers are hanging on to whatever disposable cash they have.
Meanwhile, exports - which had until recently been supporting the economy - fell at the sharpest rate since 1970 at an annual rate of 23.6%, down from 19.7%.
The latest GDP figures were "just awful" said Matt Esteve, a currency trader at Tempus Consulting in Washington DC. "It shows the weak state of the world's largest economy."
And Boris Schlossberg, director of currency research at GFT Forex said there was "doom all over".
“Gold rose above $1,000 an ounce on Friday for the first time since March last year as nervous investors piled into the yellow metal to preserve wealth amid a tumbling stock market.
Long-term inflation worries fanned by the massive U.S. economic stimulus package signed by President Barack Obama this week has driven investors into gold, which is perceived as the most likely asset to hold its value against economic head winds.
"I think there's a little bit of panic out there. Equities are setting new lows and gold is the place to run to. I don't think there's much more than that," said Robert MacIntosh, chief economist at Eaton Vance in Boston.
Bullion continued to appreciate against other asset classes and commodities on Friday amid renewed fears that the U.S. government could be forced to nationalize banks amid a worsening financial crisis.
A ratio of gold against the S&P 500 index rose to its highest level since September 1990, and gold/oil ratio was at its loftiest since December 1998, according to Reuters data.
Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange settled up $25.70, or 2.6 percent, at $1,002.20 an ounce. They reached a session high of $1,007.70, their highest price since March 2008.
Spot gold hit a peak of $1,005.40, its strongest level since March 18. It was at $993.80 an ounce at 2:42 p.m. EST, up 2.0 percent against $973.75 in New York late on Thursday.
The metal is poised to rise further, possibly targeting last March's all-time high of $1,030.80 an ounce, analysts said.
Gold options market also pointed to sharply higher prices of the metal.
COMEX gold floor trader Mihir Dange said that trading of December $1,200 call options were extremely active and that gold rising to between $1,200 and $1,300 by year end "was not unrealistic by any standard."
Meanwhile, New York's SPDR Gold Trust, the No. 1 gold exchange-traded fund commonly known as GLD, said its holdings rose nearly five tonnes to a record 1,028.98 tonnes on Thursday, while the iShares Silver Trust's silver holdings climbed 18.4 tonnes to an all-time high of 7,892 tonnes.
U.S. equity markets tumbled as much as 3 percent to their weakest levels since November before they partially recovered. Falling stocks boost the appeal of safe-haven assets like gold.”
“Gold Prices have increased substantially since falling towards the $600 per ounce mark in the latter part of last year and an increasing number of commentators have claimed in recent weeks that the yellow metal is in for a strong 2009.
Now Frank Lesh from the Chicago-based firm has explained that, as investors continue to look upon the economic turmoil with fear, gold is one of the only places they are willing to put their money.
He told the news provider: "Worldwide, gold is seen as a safe place to be. It's one of the few assets that made money last year.
"Everybody wonders: 'Where should I go with my money this year?' When you look around, gold is one of the few recipients."”
“The rise in gold, on the other hand, is easily explained: the dollar is rapidly becoming trash, meaning worth little more than the paper on which it is printed, anybody who owns anything denominated in dollars is going to get financially killed, and gold is the only safe place to put money, unless you happen to be one of those fortune tellers who knows what currency and economy will replace the American one.”
“Gold hit $US1005.40 an ounce on Friday, just 2.5% below the record $US1030.80 reached last March.
"Despite the correction going on, it is clear that gold is the only class of assets investors can put their money in,'' said Tatsufumi Okoshi, senior economist at Nomura Securities Co's financial and economic research centre.
"Stocks are hit hard, other commodities are down, and an expected fall in bond prices keeps new money from flowing into bonds,'' he said, referring to a glut of government debt supply in the United States and other countries.
Gold is becoming more attractive compared with US Treasuries, often seen as the least risky asset, as the slide in Treasury yields is no longer sustainable due to an impending surge of bond issues, analysts said.”
“Gold is regaining its safe-haven status as an earthquake rocks financial markets and makes standard investments seem more risky.”
"All currency crises have been caused by excessive debt," McGuire says. "The mere possibility that such a crisis can occur in the dollar makes gold valuable as a hedge."
Maybe there is doom to be seen. At least the experts are saying there is a crisis. And, the bad news. It's going to get worse. I own land, a home,and my cars. I have no debt and yes I can grow food and hunt.
Again, Buy gold it's the only safe place to protect your money from total loss.
sources:
http://news.bbc.co.uk/2/hi/business/7915040.stm
http://www.reuters.com/article/ousiv/idUSTRE51J3DM20090220
http://goldnews.bullionvault.com/Goldbug/gold_investment/investors_viewing_gold_as_safe_place_to_be_19011283
http://www.silverbearcafe.com/private/safeplace.html
http://business.theage.com.au/business/markets/gold-dips-to-around-us985-20090224-8g1a.html
http://finance.sympatico.msn.ca/investing/stocks/article.aspx?cp-documentid=10476744
http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/Why-Does-Gold-Matter.aspx#pageTopAchor
