Dear Dr. Don,
I am 87 and have a monthly income of $2,296. I have $100,025 invested in money markets and just inherited $400,000. I am going to move to a retirement home and need advice on how to invest $400,000 to get the best interest. I have no debts.
— Alberta Accumulates
As you no doubt know, you’re earning next to nothing in the money markets. You weren’t clear whether you’ve invested in a money market account, or MMA, with your bank, or in a money market mutual fund in a brokerage account or with a mutual fund family. Because an MMA is FDIC-insured, and the mutual funds aren’t insured, you should know where your money is invested.
When managing your short-term investments, strike the right balance in terms of safety, liquidity and yield. Don’t chase yield at the expense of safety and liquidity.
Your financial goals for the inheritance should influence how it’s invested. If you expect to leave most of the money to the beneficiaries of your estate, make sure the money keeps pace with inflation and grows in purchasing power.
If your first priority is having this money as a financial backstop for your own financial needs — and any beneficiaries are only a secondary concern — focus on safety and liquidity over receiving the best interest.
It’s enough of a windfall that I think you should meet with a financial planner to discuss financial goals for the money and how it can be best invested to meet those goals. You have the money to pay for professional advice; don’t risk doing it yourself, even with an assist from Dr. Don.
The Bankrate feature “Financial planners: Not just for millionaires anymore” can help you shop for a planner. If you can’t get comfortable with the services or the planner, keep shopping or get a second opinion. If anyone offers to place you in an annuity, get up and walk away as quickly as you can.
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