||Ask Dr. Don
Late start saving for retirement
Dear Dr. Don,
I am 51 years old and, due to some early financial
problems, started saving late. My wife and I have $25,000 in savings
to invest and are able to save about $1,000 per month. I'm retired
on Social Security disability, but my wife has about 10 years before
What can we invest in that will help us live a decent
life when she retires? We only need to keep about $5,000 on hand
for emergencies and we can invest everything else. Our only debt
is our house note and utilities. Right now, we have $15,000 in two
different money market accounts and the rest in six- and 12-month
CDs, with all these accounts yielding very little interest. We're
considering I bonds. Please help
Series I savings bonds have two interest rate components. One
is a fixed rate that is established by the Treasury every six months,
on Nov. 1 and May 1, and remains the same for the life of the bond;
the second component is based on changes in the inflation rate as
measured by the Consumer Price Index and is announced by the Treasury
on those same dates. This component can change every six months.
When you buy a Series I savings bond, you'll know
the fixed rate over the life of the investment and the inflation
rate component over the first six months. This
Bankrate feature tells you more about why you might want to
buy Series I savings bonds before the reset on Nov. 1 or consider
a Series EE savings bond instead.
It's good to keep your emergency fund in liquid investments
such as a money market account. Keeping the rest of your investments
in short-term CDs and money market accounts makes it hard to see
the purchasing power of those investments grow over time.
Investing $1,000 a month over the next 10 years, combined
with your current $20,000 in nonemergency fund savings, will help
a lot in building a nest egg for retirement. Savings bonds are a
reasonable place to put some of that money, but you need to consider
a wider range of investments to reach your goal of a comfortable
Your ability to bounce back from negative investment
returns or poor investment advice is limited, so you want to put
together an investment strategy that can keep you ahead of inflation
while taking on a minimal amount of risk. That's what's good about
the Series I bonds and their Treasury counterpart, Treasury
Inflation Protected securities.
I think it's worth your while to hire a fee-based
financial planner to review your finances and your goals for retirement
and help you put together a strategy for investing this money. The
planner can help you maximize the probability that you will reach
these goals while minimizing the risk you take on in your investments.
Association of Personal Financial Advisors can help you find
an adviser that will work with you on a fee-only basis.
-- Posted: Oct. 30, 2003