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Berkshire Hathaway Inc. Message Board

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  • verylongsigh verylongsigh Dec 31, 2003 1:31 PM Flag

    This market...!

    You can open a Roth CD or money market at almost any bank. Even if you don't feel comfortable with the market at the moment, you can still contribute and keep it in cash or short term CDs.

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    • << You can open a Roth CD or money market at almost any bank. Even if you don't feel comfortable with the market at the moment, you can still contribute and keep it in cash or short term CDs. >>

      That's a very good suggestion! Thanks for bringing it to my attention.

      I've just checked our credit union's website and see that they are offering 1.65% APY on their IRAs compared to 3.60% APY for a taxable 60 month certificate of deposit.

      I don't understand that. I wonder why the spread is so large. After all, we can't withdraw from our IRAs (without incurring a federal 10% early withdrawal penalty) for at least four and a half years in my case, more for my wife. I'll have to follow up on that.

      I really get cranky lending at a negative real after tax rate. I want at least 3.14% so that after taxes (say a marginal 30%) I at least make inflation. The math: 3.14% * ( 1 - 0.30) = 2.2%. Thanks a heap Alan Greenspan. You've temporarily saved an overheated equity market (which doesn't deserve saving IMHO) by trashing the credit markets (at the expense of conservative, income orientated investors). Time to get off the soapbox.

      Thanks again verlongsigh, it is a good suggestion.

      • 1 Reply to jad1148
      • > I wonder why the spread is so large.

        Because with a Roth Money Market you can transfer the balance to another Roth account at any time. You can even pull the balance out in cash, play with it for 60 days, and then put it back in the same account or another one with no tax penalties.

        A Roth or Traditional IRA is a wrapper around another account that has special tax benefits, but doesn't change the underlying account at all. Hence, you can have:

        Roth Money Markets
        Roth CDs
        Roth index funds
        Roth mutual funds
        Roth margin AMZN to the moon, baby

        You can also freely transfer money between accounts so long as it is from one Roth account to another. (Most places charge fees to enter and or exit, however).

        At one time, I had about six different IRA accounts spread between a credit union, four mutual fund families, and Merill Lynch's Their Clients.

        Now, they're all merged into Schwab Won't Tell You Their Real Fees Until You Trade.

        I should have just stayed in Zeros.

 
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