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Ask Dave

Aging And Investing

Linda and her husband are getting up there in years, and want to know where they should put their 401k money.

QUESTION: Linda’s husband is 74 and has the bulk of his $500,000 savings in a 401k. Is there a more secure way to handle that at this point in his life, such as an IRA rollover or an insurance annuity?

ANSWER: Stay away from insurance annuities, because there are too many fees and too many different products that aren’t good. The 401k and the IRA are not products, they are not investments, they are how the investment is treated for tax purposes. You can have the IRA at the bank in a CD, where CD rates mean it will make little money but always go up, or in a mutual fund where it can go up or down in value.

I would roll it to an IRA and sit down with a good mutual fund broker who has the heart of a teacher. Learn about what you are doing and where to put the money; don’t do it because someone told you to and don’t do it unless you understand it.

If you want, you can move it into some certificates of deposit and some mutual funds with a mutual fund broker, then move $20,000 a month over into a growth and income mutual fund. Roll it to an IRA and then decide what kind of investments you want to put it in for that process.