The reason I chose to stay in Okinawa one more year is because of its low cost of living. I wanted to take a final year to settle my student loans, build up some savings, and open up an IRA.
A fellow JET who lives nearby use to work for the Federal Reserve. We had a conversation last year about investing that rather eerily foreshadowed the current Wall Street crisis. I can't quote, but he said something along the lines of, "I worked at the Fed long enough to learn that the system is flawed and people are pushing around imaginary money."
Now I am in a position to start investing and, if internet news is anything to go by, it seems the Apocalypse has come to Wall Street and opening up an IRA would be the last thing I would want to do. If I was actually in America, I'm sure I would have a better perspective of what's actually going on. I guess one way to look at it is it's the best time to invest because everything is low. But news sites keep referring to the possible bailout as the biggest since the Great Depression. If I remember my history, many banks closed because they tried to reclaim their loans, and I don't want to see that happen with me.
A bailout to me seems to be only postponing an inevitable (the idea of bailing out debt with debt doesn't make sense to me) fallout, so as someone who knows practically nothing on economics and banks, my question is: is it still safe to invest in an IRA? or are we headed towards anarchy where money is worthless and I'm better off investing in Okinawan goats to use as bartering in the future?
Putting the 大 in 大宜味.
Wednesday, September 24, 2008
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2 comments:
Cliff, Yes, it's still safe to invest in an IRA. It's actually not the IRA itself, though, that you have to worry about. That is only a tax-sheltered vehicle. It's the investments you make within your IRA that matter. Banks that are going down are hurting mostly other institutions and hedge funds and such. If you own CDs or stocks or bonds, those are federally insured (heard of FDIC?). Well, the first and last are. But a company can't take your stocks away. You own the certificate. They don't own it, they make their money on transaction fees and interest off your uninvested money. I'm oversimplifying a bit, but worry not. I'm pretty sure the U.S. government will not allow a collapse anyway - i.e. they'll float as much as they need to to keep the middle class alive. If you have more questions email me - I can give you some helpful links and recommended brokerages. Good on you for thinking about your IRA - now's the time!
It is my understanding that, unless one has a certain amount of taxable income, one is not allowed to contribute to one's IRA. This is what my mom said, because I wanted to contribute to my IRA my first year, and she called the IRS, and she said the IRS service agent said that, because my foreign income isn't taxed, that I have no taxable income in the U.S., therefore I'm unable to contribute to my IRA.
Dave or someone, please correct me if my understanding is misguided. Are you contributing?
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