Dear MarketWatch,
I have approximately $300,000 in 6-month CDs — $200,000 of that is in my financial institution and $100,000 is in one of my banks. These are paying 4.75% interest. I also have about $75,000 in some stocks that are holding their own, but are not doing much of anything, and I have about $100,000 in cash in case of an emergency. My house and cars are paid in full. In fact, I just bought a new 2024 Subaru Outback Touring three months ago and paid cash for it. The other two cars are in good running order.
My wife and I aren’t wealthy. Between the two of us, our monthly income is about $3,500 a month but, with the house and cars paid for, there is nothing we really need. We are both in our mid-70s and would have liked to have been able to travel a little bit but, due to my wife’s chronic illnesses, we can’t. My question is, are CDs a good investment right now? The CDs that I have right now are due to mature in March. Do I continue to invest in 6-month CDs or do I invest in something else?
See: I’m 59 and have $190,000 in income in quasi-retirement. Can my wife and I live comfortably with one or two trips a year?
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
Dear Reader,
It sounds like you really have everything in order, which is wonderful to hear.
CDs are a nice conservative investment right now, but they’re also only as good as their rates, and those can fluctuate from month to month, as you know. The rates for CDs have been quite favorable lately, but it isn’t clear yet what the future holds for those rates — and it isn’t likely that they’ll stay the same forever.
While they’re a good option for storing money right now, you need to think of the long-term.
Even with a chronic illness, people can expect to live decades in retirement, so you need your expenses to be covered. While your mortgage and cars are paid off, there’s always the unexpected expense, such as a home or car repair or a medical scenario. The unexpected could even be a bump in a regular bill, such as a higher electricity costs or a bigger tax hit one year.
Your money should be working for you.
The typical guidelines for asset allocation of retirement funds is to go more conservative the older one gets, as those funds need to be preserved for retirees while they’re in retirement. But that’s only part of the picture. You need that money to grow and maintain itself, so that it doesn’t dwindle too quickly as you withdraw from it. You mentioned stocks that aren’t doing very much for you — that’s a case where you should review your asset allocation, and adjust it accordingly.
Also see: I’m 71 and can’t decide if I should pay off my mortgage or get a joint annuity that’s cheaper — what should I do?
A qualified financial planner can help you. A trustworthy professional will look into your investment options, and find a mix that makes sense to generate returns without adding too much risk. It’s not that you want to be overly aggressive, but there needs to be a balance so that while you’re taking money out, your total balance isn’t dipping too low. If you can achieve that, you have a good shot at stretching your assets for the rest of your lifetime.
A professional may suggest that you keep some of that money in CDs, but not all of it. That person can help you structure a strategy that will make you feel comfortable and also help you achieve your goals.
One last note — travel. I know you mentioned due to your wife’s chronic illness, you can’t do much traveling, but is all of it out of the question? This is a time for you two to enjoy together. You may find things worthwhile to see that are local, or easily accessible by car or tour bus. Perhaps you haven’t seen all the museums, boutiques, parks or towns around you? There’s so much to see, and sometimes it’s right in our backyard.
Keep your expenses low, and enjoy your retirement whatever you decide. It sounds like you have put your peace of mind and comfort first.
Readers: Do you have suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
