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Ask Dave

Keeping Savings Handy

Elaine is older and needs to earn a certain percentage on her retirement money. Where does Dave suggest she put it?

QUESTION: Elaine’s husband died several months ago, and she will need to earn 4.5% on her money to cover her expected needs. She has $450,000 and is 70 years old. She has long term care insurance in place. There are 2 places where Dave suggests her to put her money.

ANSWER: You’ve done a great job putting this plan together. There are 2 things we can do with this money. We can either do money market accounts and certificates of deposit, which will average a little less than what you need, but they are stable and safe. We want to put some money in those, because your money will be available when you need it.

A portion of the money should be put in conservative mutual funds. I own a growth and income mutual fund that has averaged 13% over 70 years and has only lost money in 3 of the last 30 years, but the news will tell you how everything is crashing down. Put whatever you feel comfortable with in balanced funds and growth and income funds. Keep at least $100,000 in a money market and certificates of deposit. Get with your mutual fund broker and make sure they have the heart of a teacher. Don’t put money in anything unless you understand how it works.