I am getting $100,000 from a QRDO (in a divorce settlement)...My X husband recently retired and now I have to?

Question

make a decision as to where to invest the money for my retirement. I am 55 years old and I am not too knowledgeable about money investments. Do i put it in a Roth or CD's or an IRA or do i put it in mutual funds or an annunity? please someone advise.

Answer 1

As others have suggested you really should seek advice from a financial advisor at a bank. What is best for you is dependent on your circumstances. For example:
1. Is the money from his 401k? If so, you should roll it into an IRA to avoid tax consequences.
2. How much of the money will you need to live on? Can you live on the interest portion alone or will you be needing a portion of the principal as well?
3. How close to retirement are you yourself? What other sources of income will you have at that time?
4. Are you a saver or a spender? Is there any danger that having the money readily available to you, that you would be prone to blow through it foolishly?
5. How tolerant to risk are you? Would you be uncomfortable with the risks of the stock market?
A good financial advisor should be asking you these questions and more. Beware if they immediately want to sell you a variable annuity or anything else that generates a commission. Don't rush into anything. You can always initially put the money into the money market (approx 5% return) and then decide where to invest it later on. You can do this whether you are eligible to roll it into an IRA or not.
The $100,000 would generate approx $600 a month for life if you choose an "immediate" fixed annuity. This may be a good choice if you need the certainty of a low risk steady monthly income and don't think you might ever need a portion of the principal.
If you don't mind a little risk and want to retain control over the money then investing in a mix of quality mutual funds, bonds and CD's would be a good option. Not over 60% in stock funds. If you go this route consider Vanguard which has low expenses. Perhaps one of their life cycle funds might be appropriate if you are not too knowledgeable about investments.
Again, be cautious that whatever financial advisor you choose doesn't just try to sell you variable annuities. If they do, find someone else.
Good luck!

Answer 2

Definitly do not go to a bank. Ask around. Get recommendations and a referral to an advisor that has been in the business for an extended amount of time. Look for a designation, CFP, ChFC, CLU after their name and ask them their area of expertise. You don't want to go to an advisor specializing in long term care insurance. Ask your CPA if there is an advantage for you to do either a Roth IRA or a traditional IRA and take advantage of this for both 2006 and in January for 2007. You can do a catch-up on the IRA since you are over 50.

Everyone has different risk tolerances so I am not going to say put this % here and this % there. That is why you need to sit down with a professional. Do not feel pressured and if you do not like the professional or you do not understand the investment the advisor is putting you into then thank him/her and walk out the door to find a new advisor.

Beware of variable annuities due to the high internal M and E expenses and the often long back end surrender charge. Most annuities will give you a penelty if you try and move the money prior to 6 or 7 years. Some are fewer years and I've seen some with 12 year surrender periods. Also you can not take money from an annuity until age 59 1/2 without an IRS penelty.

Don't be afraid to ask the advisor how they get paid. Make a list of your goals and priorities for your life. Have the advisor work with you on accomplishing your goals. This will help you preserve your money and you will have something to show for the planning you are about to do.

Good luck and happy holidays.

Answer 3

I would go to your bank and discuss the issue with the financial person there. Since you are relatively close to retirement, you want to make sure you use a more stable and safe investment strategy. I am not sure what your other financial retirement plans are though. Using some basic ideas, you should consider investing 65% in balanced stocks and the rest in bonds, money markets or CDs. If you have a substantial investment plan already for your retirement, then you may be able to accept more risk and could use the $100k in a more risky manner and put more into stocks and increase the percentage of high risk/reward stocks. With that sort of money though you can open a rather healthy investment package and not have to worry about fees and such.

Answer 4

At age 55 you can make "catch-up" contributions to an IRA. I would highly recommend going to an INDEPENDENT financial planner to discuss your options. Most banks and financial institutions are tied to certain products, so they only offer a limited number of investment options. With $100,000 you don't want to put your eggs in one financial basket. An independent financial planner will steer you towards the best investment vehicles, not just those he gets a fee from. Ask whether s/he is truly independent and what types of services s/he offers before investing.

I would also recommend a new investment vehicle called Prosper. It is a low to high risk investment in peer loans. You essentially purchase promissory notes from individuals in need of money. At you age, I would suggest the low risk category if you pursue this option. The site is founded by the founders of e-Loan and eBay. More details at http://www.ProsperFiveStar.com. If you use this vehicle, I would recommend putting no more than $5000 into it. Once the borrowers begin paying on the promissory notes, the interest will automatically reinvest so you'll never have to put another dime into it.

Lastly, I would recommend putting at least 25% of the settlement into a high-yield savings account. Citibank, Emigrant Direct, and Capital One all offer accounts at 5% APR or higher. It's a safe way to invest and you can transfer your money in and out at will.

Answer 5

You need to go to a firm or bank to get info. on the pros and cons of each. It is good to invest, but you need that which is best for your particular needs. I suggest you go for an orientation and then decide what's best for you. One thing, don't go and tell them exactly how much you want to invest. Once they hear the amount, they'll want to have a field day according to what is best for the firm, bank or their commission. I hope this helps.

Also, you can search online for the definitions of each alternative and study it all on your own.