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Feb 22 2010 12:00AM

Question


I am 50 years old, single and live at home with parents. My salary is $30,000. I have $86,000 in a tax-sheltered annuity, $86,000 in Certificate of Deposits (CDs), $10,000 in a credit union and $10,000 in cash. Until recently I have not paid attention to anything financial and now am wondering if I have all my money in the right places — for my future and to avoid losing more than I have already. Should I invest in a Roth Individual Retirement Account (Roth IRA)? If not, what is the best vehicle to put my money in?

Answer


"It is very difficult to give you the advice you are asking for without knowing more about you, your cash flow needs, your ability to continue living with your folks, how well set they are and whether you'll either have to help care for them or inherit money from them, and the like," said FPA member Kathleen A. Boyle, CFP®, president of Chapin Hill Advisors, Inc. "We are also in a very volatile market so giving any type of investment advice to a novice is also difficult."

That said, Boyle offered the following guidance:

"First, search for and select a financial planner or adviser who can give you personalized assistance.

"In the very big picture, a Roth IRA does make a lot of sense for anyone who has five-plus years to let it grow and preferably more. It may also make sense to roll over other retirement investments (possibly the tax-sheltered annuity) if you are not active in a Roth, but you'll need to have non retirement cash to pay the taxes.
 
"For a novice investor, you should proceed very carefully and try to gain knowledge of investment vehicles. A gradual plan to invest those funds in a variety of mutual funds or exchange-traded funds (ETFs) should be implemented.

"I would suggest you try to educate yourself with some books or classes before plunging in to investments."

Another planner, meanwhile, offered an additional item to consider in your decision. FPA member Arthur Dolega, CFP®, the founder of Vision Financial Services, said the following: "If your goal is retirement, a Roth IRA may be a good option. While you don't get to deduct the contribution from your income (the deduction would've been of minimal value to you anyway), the withdrawals will be tax free when you turn 59 ½ years old. You may use the account for retirement income along with the distributions from your Tax Sheltered Annuity (TSA) and Social Security. While it seems like your living expenses may not be high, being that you live with your parents, it may be a good idea to calculate your retirement needs."

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