What's the best way to invest for my mothers retirement?

Question

My mom is 55 and has a dismal amount of savings for retirement. She just started putting in the minimum match on her 401k ~5~ years ago at my urging. She has no savings and is living from month to month. I'm 22 and making far more than I'm spending, and paying 10% into my own 401k. I want to open a retirement account in her name to supplement her social security. What's the best way to do it in her name, and whats the best type of account for this situation?

Also, if she averaged 50,000 a year for the past 30 years, what can she expect from social security when it comes time to retire?

Answer 1

This is the last place you should be asking these questions. You don't know the qualifications or the intent of anyone that answers.

Having said that here's my 2 cents..........
Open a ROTH IRA for her. Don't go through a bank or insurance company. If this is her only "investments" get something from a no-load Mutual Fund company that will allocate the investments based on her age and retirement date. Call Vanguard, Fidelity, T.Rowe Price (and some others) for the best ideas.

These funds will "fluctuate" but history has shown us that the proper asset allocation will give her the best return.

Good luck. Read a couple of books on retirement investing. Be very cautious of web sites and email addresses given in response to your question.

BTW: kittyrogers's answer is pretty good.........

Answer 2

I think you need to let Mom handle her own affairs. If she indeed made an averaged out income of $50,000 over the past 30 years, then I don't quite understand why she does not already have a retirement plan at some firm. As for SS, she shoul dbe receiving a yearly statement of her earnings from the SS Administration, telling her what to expect down the line and listing her earnings quarter by quarter. Befor eyou run out and try and assume control of Mom's finances, better sit down with her and go over a few things, but don't expect her to agree with everything you advise. I know at 22 you feel you are ery wordly, but believe me, you are just beginning and have a LOT to learn. In addition, she would really be wise to consult a professional in these matters. You are very young and really need to worry about your own retirement (it will come quicker than you imagine), and urge Mom to seek out the services of a good and reputable financial advisor (one who makes his or her living in the business). And many people in ther mid-fifites are still paying mortgages, car payments, and all the rest (and college educations for their kids), and thus, saving money becomes very difficult unless there is a lot of disposable income which does not sound like your mother's situation. Believe me, at 22 you may be assuming you have all the right answers for her, but in another three decades, you may see why she was unable to save a substantial amount of money. If she has over-spending problems and is in debt (deep debt) then she needs financial couseling and debt consolidation. Your mother is an adult and too much interference from you can end up backfiring. Most middle-aged people do not appreciate their young offspring interfering in their finanacial affairs.

Answer 3

I cannot answer for the social security part of your question, but I can answer your first set of questions. If you feel you have enough to spare to help your mother out, I would suggest the following: Pay at least 5% into your own 401(k) for right now. Have the additional 5% (or whatever percentage you choose) of your pay either direct deposited into a high yield savings account or into an IRA in your mother's name. Technically, she will have to open the account for herself. Depending on the type of Individual Retirement Account, she should be able to make contributions to it at any time, up to $5,000 for 2007 into a Traditional IRA account. If she would hit the $5,000 mark before the year is up, I would place the additional money into CD's at different times in the year. Technically, you should do what we call "laddering" in banking. This is where you seperate one large lump sum into a few different CD's and you stagger when the CD's will come due. Basically, you do this to assure that, in case something might come up, you have money available to you without incurring a penalty for closing a CD early.

I hope this all makes sense to you!! I wish you lived in the Toledo, OH area because I would be GLAD to help you out! I open accounts for a community bank for a living, and we have WONDERFUL IRAs, CDs, and savings accounts that would fit your mother's needs... If I can be of any additional assistance, please feel free to contact me!! Good luck with you and your Mother's future!! I wish you the best in your decision making!! :)

Answer 4

First of all is she debt free? That needs to be the first priority!

As far as investing, check out the Dave Ramsey website. He recommend mutual funds with a 10+ yr track record.